CEO Cole Wilcox On Longboard's Investment Philosophy
In a repeat appearance on Michael Covel’s podcast, Trend Following Radio, on April 7, Longboard CEO Cole Wilcox shared Longboard’s approach to successfully investing in global markets.
Michael’s opening question was a broad one: What’s your investment philosophy?
Expect the unexpected
The world markets, said Cole, are a “powerful and unknown force” that often defies our ability to interpret them or predict their future direction. So, Longboard’s approach, like most trend followers, is to be flexible, not dogmatic. The company lets the markets guide how to best position the firm’s investments.
He explained using a surfing analogy: “A surfer doesn’t control the ocean; he knows he doesn’t control the ocean, but what he can do is design a tool for participating in those powerful waves in which you can have a lot of fun and at the same time stay safe.”
Cole pointed out that in the U.S., historically, most investors had access to only equities and fixed income investments, stocks and bonds.
He contends that today’s investors “really need other sources of uncorrelated strategies to help diversify those traditional approaches…something that can provide that diversification benefit.”
“Diversification is the only free lunch … So if you want to diversify, you really need to focus on a more multi-asset-class portfolio.”
Regardless of your strategy, price is the common denominator
Longboard actively trades in 140 markets around the world. Cole acknowledges that no one can be an expert in the fundamentals of every one of those markets. So, the company focuses on the one, reliable factor that’s a consistent gauge in every market: price.
“Focusing on the price trends, what those price trends are doing in a positive or negative way, holding on to your winners, folding your losers … and doing that in a very disciplined way.” Cole calls those the common denominators of all successful investment strategies.
He adds that, as a mid-sized company, Longboard can often be more nimble than a large one. It can participate in smaller markets and take advantage of opportunities there.
“We’re pro surfers. We like all waves. So we have to go and travel to where the waves are breaking in the world.”
Michael next asked about Longboard’s investment mindset: “Are you offensive- or defensive-minded?”
“Definitely defensive-minded,” Cole responded. “If you lose 50% of your money on an investment, it’s not a 50% return to get back to break even. It requires you to double your money.”
Avoiding those losses, said Cole, ensures you’ll have the resources to “stick with those big, long, perfect waves for as long as you can, and that’s actually where the money gets made.”
The secrets of Longboard’s rapid growth
In the balance of the interview, Michael probed why Cole thought Longboard has experienced such dramatic growth.
Cole attributed it to a number of things, including:
- An innovative new product that met a real need: giving all investors easy access to alternative investments
- Longboard’s active engagement and open communication with clients to help them understand how its funds work and can add value to their portfolios
- A unique corporate culture that draws talented, like-minded people seeking growth opportunities and personal development as part of the company
“I’ll boil it down into three core components,” said Cole:
- “The dream, or vision,
- The people you surround yourself with that ultimately are going to drive success and execute on that vision,
- The culture, which includes how those people come together, work together, the principles and operating rules of the game. Its important to find people who are both great people but also culturally aligned.”
“When you can get those three things to line up inside an organization, you really can create something that’s kind of magical.”