Top 10 Daniel Loeb Quotes | Activist Investing Strategy

Daniel Loeb is the Billionaire hedge fund manager of an event driven, value investing fund.

Loeb’s Strategy is that of an Activist investor as he likes to buy troubled companies, replace inefficient & bad managers and thus increase value for shareholders, he describes this as his “Key to success”.

Other Famous Activist Investors include, the Legendary Bill Ackman and Carl Ichan.

Investing Strategy: Activist Investor , Hedge Fund

1. From Chaos comes Opportunity

“From Chaos Comes Opportunity” – Daniel Loeb (Activist Investor) . This is very similar to our saying here at Motivation 2 invest, “Volatility = Opportunity”. When there is a Stock Market Crash and fear reigns in the air. Stocks can be bought cheaper and this can often mean an opportunity. The goal is to find out the situations where the Stock Market has overreacted or misunderstood a business. 

As Warren Buffett states “Be Greedy when others are Fearful and Fearful when others are Greedy”.

2. Be an Opportunist

“Our Philosophy is to be opportunistic across different assets” – Daniel Loeb (Activist Investor)   As CNBC’s Jim Cramer says “There is always a bull market somewhere” . There is always an opportunity to invest across many different assets this could be stocks, crypto, real estate etc. The trick is identifying the opportunities which others may have not discovered yet and then placing a high conviction bet. Bill Ackman is a master of this.

3. How to start a Hedge Fund?

“I had five family members, a few friends & $340k in life savings from 10 years working on Wall Street” – Daniel Loeb (Activist Investor) . We all start somewhere and raising the initial capital to start a hedge fund is no easy task. 

But as the Legendary Warren Buffett states “If your investing returns are good, investors will swim through shark infested waters to invest with you” this is very true. I previously interviewed a Former Hedge Fund Manager on my channel and he reveals the steps to starting a Hedge Fund.

4. Invest into the Misunderstood

“We look for companies which are misunderstood by the market & mispriced” – Daniel Loeb. 

The Stock Market is an auction based system similar to Horse racing a “Pari-mutuel” system. Basically this means you can’t just invest into the “best horse (best company)” because as this information becomes known by the public, the odd’s change.

Thus generally the majority of famous investors look for a “mispricing” in the Stock Market. This is where the Stock Market has got it wrong or potentially overreacted, the volatility can equal an opportunity. 

5. Invest into Special Events

“We invest when we see a special situation or event” – Daniel Loeb (Activist Investor) . A Special Situation could be a Merger/Acquisition, Stock Split, IPO, Company Default, Spinoff etc. These all offer opportunities from the volatility expected other investors which invest into special situations include: Howard Marks, Carl Ichan,Bill Ackman etc.

6. Hedge Funds have Changed

“It took me 5 years to get $100 Million, today people are starting out of the gate with that much” – Daniel Loeb (Legendary Investor). Raising Capital is easier today than it used to be in the past. This is for a few reasons, increased wealth, increased regulation, Low Interest rates etc. 

7. Develop an Investing Instinct

“Instinct is a type of Pattern Recognition which comes from experience of looking at companies which work” – Daniel Loeb (Activist Investor). As the Legendary Investor Peter Lynch says “The Person who turns over the most rocks wins”.

The More companies you analyse and the more investing experience you have, the more this “Instinct” for “Pattern Recognition” develops.

8. “Timing is Everything”

“Timing is Everything in Markets” – Daniel Loeb (Activist Investor).  Timing the market is extremely difficult as the old quote says “Time in the Market is better than trying to time the market”.   As Data from CNBC & multiple studies show:

“If an investor sat out the S&P 500’s 10 best days per decade

Then returns would be significantly lower.”

Analysing data going back to the 1930’s , If an investor sat out the S&P 500′s 10 best days each decade, the total return would stand at a measly 28%! However, if an investor held through all the market crashes & volatility total returns would have been a whopping 17,715%!

9. Embrace Capitalism 

“Capitalism without Bankruptcy is like Christianity without Hell” – Daniel Loeb (Activist investor).  
During the Financial Crisis of 2008 & 2020 Pandemic many banks & businesses were bailed out and stopped from going under. Now although this may have seemed necessary at the time, there is a few risks with this. Firstly, there can be “Zombie companies” running which clogs up the free market.

Secondly, Banks & Businesses which were taking more risk before a recession (over leveraged etc) would not have been punished for their aggressive style. Thus in the future they entire banking system may continue taking more risk, because if they win (they win big) and if they lose they get bailed out. 

10. Process is everything

“Overconfidence in a bad process is like winning at Russian Roulette, then thinking it’s a great strategy…before blowing your brains out!” – Daniel Loeb (Activist investor) . Legendary Investor Howard Marks has a similar quote. Luck plays a big part in every wildly successful outcome, thus you cannot judge your investing success purely on the outcome…the process must be analysed.

Want to Learn How to Invest?

Rather than blindly picking stocks or following rumours, Why not learn how the greatest investors of all time invest? To find out more check out our Ultimate Investing Strategy Course.