Mike Compton: The Founder of Blue Cut Capital Joins the Revolution

Mike Compton is one of the first investors to join the revolutionary platform of kaChing. Though still a new idea, Mike takes this new platform very seriously, and it’s certainly paying off. With a kaChing IQ of 144, he ranks amongst the top 1% of the kaChing community.

He earned his high IQ through great returns, discipline to his strategy, and solid research (you can reach his recent one here). In our interview, he shares with us some of his personal interests, background, and the family advantages he leverages on Wall Street.

“Mike, can you tell us more about BlueCut Capital and how it got started?”

BlueCut Capital began when my brothers and I started www.bluecutmarkets.com and its predecessor. We each function in different capacities within the financial industry (asset management, trading, and private equity), and the website has been a forum to exchange ideas and share relevant research and commentary. Originally, the site was for just the three of us, but now has developed a strong following. BlueCut Capital formed as a vehicle to invest according to the ideas and research that were developed thru this collaboration.

“What is your personal background? We’d love to hear more about your educational background, your past experiences, and anything else that will help us get to know you better.”

I am currently an institutional investment consultant, focusing on private equity. Our firm works with Endowments, Foundations, Not-for-Profit Organizations, and Public Funds. Previously, I worked in investment banking. My oldest brother works in the long only asset management space. My younger trades currency and commodities. They are a great informal resource for me in the idea generation and research side of running the portfolio. However, as the portfolio manager, I make the ultimate investment and trading decisions for the kaChing.com portfolio. Having inputs from different viewpoints allows BlueCut’s investment style to be unique.

“BlueCut Capital is currently in a unique position at kaChing. You currently possess a high kaChing IQ, qualifying you as a Genius investor. However, your 1 yr performance has been lagging behind some of the other Genius investors. Can you tell us more about some of the drivers behind this? What this tells me personally is that you are sticking to your core strategies with confidence despite the short-term performance. Furthermore, you possess a higher kaChing IQ because of your high quality research and a good historical performance. I’d love to hear your thoughts on this.”

First of all, my primary concern is generating positive returns moving forward. I run the portfolio according to what I see developing in the future, not what has happened in the past. The strategy does not aim to mirror one particular index; the returns could look outstanding or terrible when compared to a specific benchmark at a particular period in time.

For example, as of today the portfolio is up over 40% year to date, 70% off the March low and 185% since inception. However, over the last 12 months we’re lagging the S&P 500. I’m well aware of the performance derby that goes on in the institutional asset management space and the flow of capital into those with the best trailing performance. I’m not interested in participating in that game by taking positions in order to keep pace with index performance. There are plenty of mutual funds that charge a lot of money to do that while providing mediocre relative returns.

Research is an important part of the portfolio management process, so I’m glad that it has been received favorably.

kaChing gives investors the ability to vote whether or not they like the philosophy with their checkbooks. So far, we have not been embraced on the site with respect to customer assets following the portfolio. Hopefully, this will change as investors become more comfortable with our strategy. Again, the goal is not to replicate an index, but to develop investment and trading ideas that contribute to significant outperformance over a market cycle. The performance since inception speaks to BlueCut’s ability to do this so far, but is no indication of future results.

“As you know, kaChing is transforming the way investments are made, providing additional channels to consumers and money managers. How will kaChing change the dynamics going forward? “

I think kaChing will prove to be a revolutionary platform for money managers to demonstrate their skill. It gives anyone the ability to see exactly what I am investing in, and why I’m making those decisions. kaChing allows the average person to monitor the holdings of a select group of investing “geniuses” with strong track records prior to investing with them, and decide whether or not they like the manager’s style. Since the idea is still new, I think it will take some time for people to adopt the concept of investing with “geniuses”. However, over the long term, I believe investors will move a portion of their investment assets away from traditional actively managed mutual funds to qualified kaChing managers.

“Lastly, what do you enjoy doing outside of Wall Street?”

My brothers and I are all very avid tennis players. Each of us played in college and we continue to play now. It helps relieve some of the stress of being on Wall Street.

It’s always great to meet a fellow tennis player. Thanks Mike for your story.