Andy Kessler has a good piece out titled ‘Ray Dalio and the Market’s Pulse‘.
I quote Andy here often. He himself is a great investor and I prefer to follow him over Ray.
I like this quote most in the piece from Andy on investing:
The core of investing is quite simple: Determine what everyone else thinks, and then figure out in which direction they are wrong. That’s it. No one tells you what they think. You’ve got to feel it. That’s why Wall Streeters say things like, “We are lowering our above consensus expectations earnings estimates.” It’s all about figuring out what is priced into a stock right now. That’s the pulse of the market, the collective mind meld aggregated into stock prices. I know from experience this is the hardest part of running a hedge fund. You can find the greatest story ever, but if everyone already knows it, there’s no money to be made.
For example, in my personal portfolio, I still think the market is wrong About Apple. Their hardware distribution lead from Apple stores and their support lead with genius bars remains a huge competitive advantage. Even at $700 plus billion. The media and Wall Street continue to get caught up in the Apple products and launches.
Sure, Amazon and Google could beat them in hardware or with voice. So, I own Google and Amazon as a hedge (go ahead and laugh but it has worked for years).
My biggest zig (through personal investments and our fund Social Leverage) to the market’s zag, has been my focus on personal investing and the next generation of do-it yourself investment products, services and brands.
From 2008-2015, the fintech venture capitalist’s poured hundreds of millions into robo and passive investing companies chasing Vanguard. The indexing bubble has materialized for sure, but the biggest venture returns have flown to the investors funding the next Etrade for the active investor (like Robinhood, Etoro and Coinbase). Directionally, I totally agreed with the venture capitalist theme, but chose Schwab as a great proxy and have owned it and blogged about it for years.
Now that Robinhood and Coinbase have hit unicorn status with millions of active accounts, the money will really flow into active investing startups.
You do not need inside information to have an edge. You do need to read endlessly, listen and find the pulse. Keeping a journal, playing with all the new products/toys and paying for mentorship are the best ways I know to find that pulse.
Disclosure – I am an investor in Robinhood and Etoro.
Also published on Medium.