started poring over piles of Baldwin’s financial statements.... The
key to spotting that pattern lay in obscure reports that Baldwin
was required to file with the state insurance regulators, and Mr.
Chanos obtained the reports at the suggestion of Ray Dirks” (Dar-
ling, “Picking a Loser,” Wall Street Journal, Sept. 28, 1983).
The second type of analyst that Brinson described is intuitive,
with the capacity to take the facts and spot unusual patterns. We
marvel at Sherlock Holmes when he solves a case with his incred-
ible intellect. Invariably he chides Watson, “You see but you do
not observe.” He means, of course, that all of us see the same
material, read the same papers, and listen to same news reports—
but some of us (like Holmes) are able to see a different pattern. In
fact, Holmes says of himself that his talent is the unusual interplay
of imagination and reality in his reasoning. Well, that’s what we’ve
been discussing. An analyst like Chanos is great at finding the reality,
the deep reality behind the numbers. An intuitive analyst, with
Holmes-like intuition, can take those facts and discern patterns that
others cannot see.
An example of an intuitive investor is Dean LeBaron, formerly
of Batterymarch. I remember attending a management meeting with
Intel in which LeBaron was sitting in the back, quietly taking notes.
Various analysts were peppering management with questions, all
aimed at exposing the mother lode of hidden value or sham. There
was a pause for just a moment, and then LeBaron lobbed his
question from the back of the room. To this day I can’t remember
what the question was—I wish I could. What I do remember was
a sea of blank analyst faces, with their heads cocked like listening
dogs, all clueless as to what LeBaron was talking about. All except
the chief financial officer of Intel. He looked toward the back of
the room and smiled, his face seeming to say, “So, one of you has
seen beyond the smoke and mirrors to the real issue.” He gave a
short answer; LeBaron wrote it down and then promptly left the
room. The rest of us knew that something had happened, that a
buy or sell signal had been revealed, but none of us knew which.Tools for Investment Teams 8308-13 ware 83 1/19/01, 1:10 PM