Last Updated on 14 October, 2021 by Samuelsson
Michael Lauer is an American investor and the founder of HFC. He holds a degree in International Relations and an MBA in finance. At first, he worked for the United States intelligence services.
Michael was recommended to Oppenheimer by a family friend, and he worked there as an equity analyst. He worked closely with the firms’ trading and investment banking departments. Michael worked in similar roles for three different firms — specializing in tech stocks before becoming a portfolio manager. He gained more knowledge and sharpened his proficiencies as an all-around investment professional.
However, as with many others, his trading journey was not without some hiccups. He suffered a substantial loss in the stock market crash of ’87. He was holding positions in small-cap stocks, which dropped one-third of their value in one day. And he was heavily leveraged. He had a huge margin call to cover, which would require him to borrow money to be able to cover it. He lost all the winnings for that year (the first nine months of 1987).
Now, he no longer uses leverage. He believes that many large mutual funds are just closet trackers because they are not judged by their absolute performance but by their performance compared with an index. Most portfolio managers overweigh the most significant stocks resulting in gaps in the PE ratios of the top fifty stocks in the S&P 500 index compared to the rest. But he thinks that this approach is a terrible idea since the objective of the investors is to make money.
Michael is a value-focused investor and would generally hold stocks whose market capitalization is less than its revenues. He believes in taking large positions in conviction stocks. He usually holds a maximum of fifteen positions, entering and exiting positions frequently. In his words: “Career risk is not in line with investment risk, and investors who think they are investing in low-risk blue chips stocks are more exposed to risk than they know.”
He uses some of Warren Buffet’s methods. His value screening process involves several factors, including industry knowledge, a strong balance sheet, and a potential catalyst for a price move upwards, etc. His goal is to double his money in stock within twelve months. After achieving this, he exits his position even if he believes the price has the potential to continue moving to the upside. Michael does not use stops on his long positions because his screening process makes the downside risk acceptable.
He also shorts stocks but carefully selects overpriced companies after watching out for upcoming news releases (e.g., earnings releases) that could cause a decline. He usually goes short a week or two before the news release and then exits his position after the news release. He always uses stops on short positions.
In 2003, Mr. Lauer was prosecuted by the SEC over allegations that he lied to investors about the nature of his business. But he was acquitted in 2011.
Michael has more than three decades of relevant experience and has records of achievements across various fields. He participated in motorsports both as a driver and a team owner.