Thread by @eboroian

Some things that have helped me improve vs the traditional 'value investor' I was 15 years ago. Two categories: quality & contrarianism

On quality: spend more time on direction vs width of comp advantage...

Spend more time on differences in operating model (or business model) and nuanced patterns associated with high returns (example small % of customer costs but mission critical) vs general 'moats', ie spend more time on the actual operating intricacies

Spend more time researching on the ground & speaking to people in the field and less time behind a desk. People who interact operationally with a company often have perspective you can't get in documents. Stop looking for ‘single factors’…atypical returns result from confluence

Spend more time identifying the right questions & thus on the 3 or 4 critical factors that will make or break the investment case vs getting lots of information on things that don't really matter (if you can't identify 3-4 critical factors, you don't know it well enough)...

Related to that, start with simple questions to avoid mistakes. For example, one of my first questions is: do I have a very good sense of what the business and industry will look like 10-15 years from now? Or... can it grow during a downturn or 'low growth' economic environment?

Spend more time on qualitative factors not easily measurable & thus less likely to be incorporated (culture etc). Meaningful different views rarely come from quant side imo. I often wonder if there are too many numerate yet noncreative people doing quant work to make a difference

Screens are easier to run today & everyone uses them, it's low hanging fruit. Spend time looking for things that are likely missed, ie doesn’t show up in screen yet. Something of quality that screens well is probably priced, something at 10x P/E probably deserves to be cheap

Spend more time consolidating knowledge (decelerating) with thoughtful reflection about what you've learned vs investing as soon as you've done the work...avoid 'shiny new thing' syndrome. Often, the difference won’t be in what you buy, but when you buy it…

On the contrarian aspect...spend more time on mispricing vs 'cheap'. Spend more time thinking using distribution of potential outcomes (and take the downside into account) vs using target prices...

Spend more time respecting the market vs thinking you've figured something out the market has missed. The market is right more often than most value investors think... Invest in things only when there's both a tactical and strategic reason...

I've made mistakes buying things that made sense tactically but not strategically (often low quality, end up being hit or miss, or needs to be traded), and I've made mistakes buying things you want to own structurally but without a 'why now' ie being too early (opportunity cost)

Spend more time understanding market expectations...and where you might differ & why. If you can't determine whether both short term and long term market expectations are too low (also by how much), and why might be wrong, you probably don't have an edge

Stop playing the ‘EPS game’. Stocks go up over time because the underlying business outperforms expectations. In a P/E multiple, expectations are implicit vs explicit. It’s thus hard to determine clearly whether expectations are too high or low & if a legitimate mispricing

Understand that by the time all of the information is there/clear, most of the inefficiency is likely gone. Start getting comfortable with incomplete information and doubt…it’s why most investors have sold and why expectations are potentially too low

But at the same time, don't be too contrarian. It's ok to be contrarian on the situation but not also on the type of business...

Spend more time waiting and less time acting (be incredibly selective). You should be acting only a few times per year…if that. If you have 10-20 ideas per year, your hit rate will be lower and the magnitude of performance won’t be as attractive either…

Spend more time on things beneath the surface (eg regular earning adjustments, stock based comp, working cap changes etc)...these things can really matter to FCF. Also, just because something isn't under company's control, doesn't mean it's not important (raw mats, currency etc)

Forgot this one on the quality side. Spend time on things an operating manager would...for instance economics of a base unit (pricing etc), and cost structure at a product/service level. Don't spend too much time in the big picture theoretical spreadsheet...

Understand that people gravitate towards what's worked recently. Because 'compounders' have outperformed for a decade, everyone coming into the industry today wants to be a growth investor. Imo everything requires nuance. Don't get caught in the 'growth vs value' game

Focus on buying value creative businesses (mainly because you can bet bigger and hold them longer) when they’re mispriced. This works irrespective of environment in my opinion