It was late 1997 and a roaring bull market; close to the very apex of the Internet bubble.  Strangely, most portfolio managers were not beating the S&P 500 benchmark.  Lost in thought about this, I reached for my ringing telephone.  It was Roland Grimm asking if I were free for lunch.  That’s like Peter Lynch calling for breakfast or Warren Buffet asking if you can do dinner.  The answer, of course, was yes!

      Roland, as you may know, was a pioneer in growth stock investing.  His tenure in the 1950s and early 1960s, running the Fidelity Trend Fund, had made him a Wall Street legend.  Lunch was at Locke-Ober’s.  As we settled into our old Boston, wood paneled, white tablecloth surroundings, it seemed the perfect setting to discuss money management; the modern concept created at Fidelity and long practiced by my host. 

      “Roland,” I began.  “You used to beat the world.  Today, most managers can’t beat the S&P 500 and … it’s a bull market!  Why?  What’s going on?” I asked.   I then showed him a list of possible reasons for underperformance; a list I had created.  He looked at my list and then modestly said in his very patrician manner, “Frank, it’s harder than it used to be.  And there are two reasons you don’t have here; portfolio size and sell discipline.  At Fidelity, in our early years, I used to run 25 million.  We lost money then as an operating business, but did very well for our clients.  As time went by, I ran more and more money ... hundreds of millions ... eventually billions.  However, I don’t know what it’s like to run 50 billion.  But, I am sure it’s harder.  And you absolutely must have a sell discipline!” 

      As I wrote the two reasons down, I looked back at him and asked, “Do you think it is possible to beat the market today … or even just do well?”  Roland, brushing breadcrumbs off the white tablecloth, looked directly at me and challengingly said, “Well, that’s why the client is paying you a fee.  Isn’t it?” he asked.

     Since at the time it was a tremendous bull market, Roland’s comment “… you absolutely must have a sell discipline,” didn’t fully register with me.  But four years later in 2001 (the second year of the bear market), a Wall Street Journal columnist asked his readers the question, “What do you know now that you didn’t know before?”  That was the day Roland’s SELL DISCIPLINE became number one on my list.  Since then, I have come to believe there are four major determinants to portfolio performance which are listed in order of importance (see attached).   

FRANCIS PATRICK BOLAND

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1.  Effective Sell Strategy

2.  Style Agnosticism                                             

3.  Sector and (especially) Industry Selection                                                         

4.  Holding “Fat” Tails (the big winners)