Investment Lessons from Tiger Woods

Tiger Woods has won the last three tournaments he has entered, starting with the British Open and culminating with his dominating performance at the PGA last weekend.  Common to all three wins was Tiger's limited use of the driver.

Tiger can hit a driver as far as anyone on tour.  It is exciting to watch and when everything is in synch, Tiger gains a huge advantage over the field by hitting the ball well down the fairway.  But, the driver is for most golfers, including Tiger, the least accurate club in the bag. When not well struck, it can cause a lot of trouble.  An investor would likely describe the driver as high return (distance) with high risk (low likelihood of keeping the ball on the fairway). 

Starting with the British Open, Tiger Woods made the decision that given the golf courses he was facing (the environment), he wasn't prepared to accept the potential for an errant shot using his driver (risk).  So he left the driver in the bag, using more accurate clubs to safely advance the ball off the tee. Tiger was thus able to win all three tournaments by executing a lower risk, consistent strategy of keeping the ball on the fairway and avoiding a disastrous mistake with his driver.

We believe the market environment today, is much like the golf courses Tiger has faced recently - having the potential to earn an acceptable return but punishing investor mistakes. And,  that Tiger's approach of controlling risk and executing a consistent strategy can work well when investing in today's uncertain times.

So we're leaving some of our higher risk investment strategies "in the bag" for now and instead staying focused on quality companies at reasonable valuations, keeping portfolios well diversified to mitigate some of the risks we've discussed in prior posts and trying to avoid mistakes.