Last week Bill Ackman stood up at the ValueX conference in Omaha, skipped prepared remarks and took questions from the floor .

The first one went straight at the fear.

If AI keeps improving at this pace, does it replace investment management altogether?

I get versions of that question from readers all the time. It’s something I think about a lot.

If a machine can read a filing and place a trade before you’ve even opened the PDF, what chance does anyone at home have?

I listened to everything Ackman had to say. I like Ackman, he’s a smart guy. He seems reasonable, rational, and highly successful. He’s also a bit contrarian too, which I like.

What he said resonated with me.

He agreed that AI will pour fuel on everything that already dominates short-term trading, the pod shops like Millennium and Citadel with their hair-trigger stop losses, and the mountain of index money that buys whatever is already biggest.

AI can digest any filing or announcement faster than any analyst alive and act before a human finishes page one.

And to be clear, the AI here isn’t ChatGPT that you know. Hedge funds have entire teams of engineers building out inhouse AI. And they’ve been building it for years.

Now that their models are better, faster, stronger, and improving at an accelerating rate, then what chance do mere humans have in the market?

Well, as it turns out… quite a lot.

You can’t outrun the exchange from your kitchen table

As Ackman rightfully points out, the speed of AI hands very good opportunities to anyone with a time horizon longer than a minute.

When a short-term signal knocks a genuinely great company down and reactive AI-driven capital piles on, the patient investor gets a better price.

He called AI “an accelerant,” and said there’s still room for humans, because creativity means doing what has never been done before. A model trained on the past can’t create originality.

I think he’s right, and that’s why it’s a great time to be an investor.

I should also say here, being a successful investor is exactly what I’ll be talking about tomorrow afternoon at 3 pm live on our YouTube channel. I’ll be discussing with Nick Hubble, editor of The Fleet Street Letter, what it takes to successfully invest… how to go about it… and importantly, we’ll name three stocks that we think are great places to park some capital long term.

To find out those three stocks we think worth investing in now, jump onto the livestream tomorrow at 3 pm to hear what we’ve got to say. And also fire some questions at us, because as I say, we will be LIVE!

Now, back to Ackman’s comments…

For 15 years the fast money has spent absurd sums to win by a millisecond.

Hedge funds pay to park their servers in the same building as an exchange, because a few extra metres of cable is a few metres too slow.

Firms laid dedicated fibre in a dead straight line between Chicago and New Jersey, then ripped it out for microwave towers once someone worked out that light through glass travels slower than a signal through open air.

If you grew up, like I did, waiting for a 56k modem to finish screeching before a single webpage loaded, you understand this race in your bones.

Someone on fibre always beats you to the download, and trying to out-trade a co-located machine from a retail account is the same contest. It was over before you clicked buy.

Telling a broken price from a broken company

The reason speed helps the patient investor is boringly simple.

When a machine overreacts to one ugly number and dumps an excellent business, the price it leaves behind is wrong.

If the business is still excellent in three years, that wrong price was the opportunity.

The skill is telling a broken price from a broken company, then buying the first and walking away from the second.

So decide your time horizon before you buy, never after the stock has moved against you.

If the plan was always to hold for years, a scary Tuesday driven by algorithms and AI changes nothing. Keep the thesis and the price in separate lock boxes too.

If the reason you bought is intact and only the price has fallen, that’s your moment to buy more or get access to a name you’ve been watching.

If the reason itself has broken, patience just stretches a quick loss into a long one. So also have a plan to get out.

That second test matters more than the first, because cheap and doomed looks identical to cheap and brilliant on the day you buy.

Ackman’s own worst trade was Valeant, a pharma darling that fell 96% from its peak and cost his fund around US$4 billion  before he cut it loose.

So you also have to reconcile that sometimes the fast money is right, and the great company really has stopped being great.

I’m going to be talking tomorrow afternoon on the YouTube livestream about one stock in particular that I think is the best example of all this.

A stock that algorithms and AI trading has driven lower… that have also grossly undervalued because it’s unable to think creatively.

It has been marked down hard on a soft quarter or a margin scare more times than I can count, and every one of those has been a chance for anyone whose time horizon runs in years rather than days.

I’ll be naming that company specifically, and explaining why I think this too. So make sure to tune in (you can get a reminder here).

It also happens to sit near the top of Ackman’s book too.

The important takeaway here is that fast is not always right.

And the fears of fast AI trades and moves, is overblown because the patient investors care little about it.

AI will outwork and out-trade you in a day, but it will not out-invest you long term.

Until next time,

Sam Volkering
Investment Director, Southbank Investment Research

PS Yesterday, we asked which breakthrough made the Industrial Revolution possible. The answer was crop rotation.


Tune into our YouTube Live event tomorrow at 3 pm GMT to find out if the stock YOU think is the best buy right now is on my and Nick’s list.