Quote:
Originally Posted by TomG
i saw this in an article the other day and thought it applied nicely to sports betting as well.
legit top sports bettors, where is your edge coming from? how are you working to maintain it and/or create new edges in other areas?
Pretty solid list, a few thoughts:
1) In reality, doesn't happen unless you're the fastest quant with the fastest software and best hardware [often not available to most big investors yet] and got the GOAT co-location. Or you're cheating. In the 'old days' like 10-15 yrs ago in places like Korea you could get the trade prints ahead of the market with a direct exchange feed if bothered to learn how to read it.
2) If we're talking about widely traded stocks, probably ~1% of professional investors do systematically better analysis. You've seen 1 argument btw two 150 IQ people about their DCF models you've seen them all.
3) This is what actually works for most investors who provide systematic alpha for their clients. Contrarian attitude, patience to hold onto a position for 2 years or more [a lifetime in money mgmt], self-control to stop adding to losing positions and not taking profits quickly, discipline not to panic sell at the bottom - probably the most important.
4) is just optimizing for 3) above.
5) is a crucial skill. Anything that magnifies your funnel for idea generation is vitally important. I can't overstress this enough.
As long as it doesn't lead you into playing away games. Playing away games is as dumb as selling at the bottom. I knew clients that lost their entire fortunes on Russian GKOs because they 'knew' Russia would never default on Ruble debt, unlike USD debt. Wrong. They bought all the way down and got margined out at $0.07 on the dollar. Hundreds of millions of dollars woooosh.
#3-5) is why guys like me can beat the market and make a good living as long as you not actually bad at #2.
#1 is actually a hindrance to any normal investor. You can't copy Buffett because he buys whole companies but all you really need is the quarterly reports and an eye on any M+A activity. If you're building a complex model and you're not evaluating, say, KMX credit tranche defaults then you're doing it wrong.
You could have just read, say, Google's qtly report in summer 2010 or 2012 and noticed they were trading at 22x while growing at 32%, highly profitable, and $50 Billion in cash on their balance sheet. That got you a 5-bagger in less than 8 years, no genius required just simple blocking and tackling.