The Art of Execution: It’s Not What You Buy, But What You Do Next

The Experiment That Changed How We Think About Investing

The setup was as close to a controlled experiment as the investing world gets. Over roughly seven years, Freeman-Shor handed 45 elite investors sums ranging from $25 million to $150 million, with a single instruction: invest only in your very best ideas. No filler, no hedging — just each manager’s highest-conviction calls. If stock-picking skill were the secret to investing, this was the dream team to prove it.

It didn’t go to plan. Across all those carefully chosen “best ideas”, fewer than half actually made money. Some of these celebrated investors lost money on as many as two-thirds of their positions. On selection alone, they were no better than a coin. And yet the fund made money, and many individual managers were highly profitable. That paradox — wrong most of the time, profitable nonetheless — is the whole point. Their edge wasn’t in being right. It was in what they did once the market told them whether they were right or not.

The Five Tribes of Investors

Freeman-Shor sorted the investors into five “tribes” based on their habits — three describing how they handled losing positions, and two describing how they handled winners.

The Rabbits — frozen by losses

When a position fell, the Rabbits did nothing. Caught in the headlights, they neither sold nor added, but held on and hoped, endlessly reframing the story so the stock always still looked attractive. Small losses became catastrophic ones. This was the single most destructive behaviour in the study — and it’s worth remembering that a position down 90% needs a 900% gain just to get back to even. The Rabbits were more interested in being right than in making money.

The Assassins — killing losses without mercy

The Assassins had a rule and obeyed it. When a position fell past a set threshold — often a 20-33% loss — or failed to perform within a set time, they killed it, no emotion, no debate. By cutting losses ruthlessly, they ensured no single mistake could sink the portfolio. It’s unglamorous, even painful, but it works.

The Hunters — buying into the fall

The Hunters did the opposite of the Assassins, and also succeeded. Holding cash in reserve, they treated a falling price in a still-loved company as an opportunity, adding to the position at lower levels to drive down their average cost — but only after honestly re-testing the thesis with a simple question: “would I buy this today?” If yes, they loaded up; if the price never fell, they were left with a small position, which was fine. Both the Assassins and the Hunters had a deliberate plan for losers. That was what mattered.

The Raiders — snatching at small profits

Now the winners. The Raiders couldn’t resist banking a quick gain, selling winning positions after a small rise for the satisfaction of a profit. It feels great and looks prudent, but it’s a quiet disaster: of the winning stocks sold for less than a 20% gain in the study, the majority kept climbing, many becoming substantial winners the Raiders no longer owned. They cut their flowers and watered their weeds.

The Connoisseurs — enjoying every last drop

The Connoisseurs were the most successful tribe, and instructively, they did not have the best hit rate — they made money on only around four in ten investments. What set them apart was that they let their winners run, holding quality companies for years and allowing a handful of big winners to grow large enough to cover all the losers and then some. They built concentrated positions in their best ideas, trimmed only gradually, and had the patience — and high boredom threshold — to simply hold. This is where the real money was made.

The Two Lessons That Actually Matter

Strip the study to its essence and it leaves two rules, one for each side of a position.

When you’re losing, be an Assassin or a Hunter — never a Rabbit. Both winning approaches share one thing: a decision. Either the thesis is broken, so you cut it, or it still holds and the lower price is a gift, so you add. What you must never do is freeze and hope. There is no version of the future in which doing nothing about a falling position is the right move — if it recovers, you should have bought more; if it falls further, you should have sold.

When you’re winning, be a Connoisseur, not a Raider. Resist the powerful itch to bank a small profit. The whole game is won by letting a few winners grow very large, and you can’t do that if you sell them the moment they’re up 15%. The deadliest combination of all, Freeman-Shor noted, is the investor who is a Raider with winners and a Rabbit with losers — selling gains early while clinging to losses. That pairing guarantees small wins and large losses: a slow, near-certain path to poor returns. It is also, not coincidentally, exactly what the disposition effect drives most people to do.

Why Even the Best Are Wrong Half the Time

There’s a humbling second lesson buried in the data, and it’s worth dwelling on. If the world’s elite investors — people with vast resources, teams of analysts, and decades of experience — were right on fewer than half their highest-conviction ideas, what does that say about the rest of us picking shares in our spare time?

It says that being right is not the edge, and that overconfidence in stock selection is misplaced. This is one of the quiet arguments for humility in how you invest: keeping individual stock-picking to a satellite portion of a portfolio rather than its core, and leaning on low-cost diversification for the bulk of your wealth, a case we make in full in active vs passive investing. If even the best can’t reliably pick winners, the sensible response isn’t to try harder — it’s to execute better and diversify more.

What This Means for South African Investors

These lessons aren’t abstractions for hedge fund managers; they describe what happens in ordinary South African portfolios every day. The investor sitting on a local share that’s halved, unable to sell because doing so would “lock in the loss”, is a Rabbit. The one who sold a quality global holding after a modest gain, watching it double afterwards, was a Raider. The concentrated single-stock position — an inherited holding, an employer’s shares — that nobody can bring themselves to trim is the Rabbit trap waiting to spring.

The practical takeaway is simple but demanding: decide your rules before you buy, not in the heat of a falling or soaring market. Know in advance what would make you sell a loser, and resolve in advance to give a winner room to run. Behaviour beats brilliance, and a plan made in calm beats a decision made in panic — the same discipline that underpins our view on doing it yourself.

How We Think About It at Henceforward

We find Freeman-Shor’s work compelling because it confirms what we see constantly: investors are undone far more often by their reactions than by their analysis. A good plan is necessary, but how you execute it under stress is what actually determines the outcome — and stress is precisely when judgement deserts people.

This is also, candidly, where an advisor earns their keep. Much of the value we add isn’t a cleverer stock idea; it’s being the steady hand that stops a client becoming a Rabbit when a holding falls, or a Raider when one soars — helping them stick to rules set in calmer moments. As a fee-only firm, we have no incentive to churn your portfolio or chase the next idea; our job is simply to help you execute a sound plan well, year after year. In investing, that turns out to be most of the battle.