Thread by @titanvest

The Present Holds The Answer 🌱

Why effective investors don't need to predict the future, a thread ⤵️

At Titan, we understand that forecasting is especially difficult when it comes to financial markets, given their inherent complexity.

This creates a dilemma for investors who view the investing “game” as a competition of forecasting ability. 🔮 /1

A core aspect of our analytical process removes the need to forecast the countless micro and macro variables that affect investment outcomes.

The beauty of expectations investing is that we don’t have to correctly predict the future, we just need to understand the present.🌱 /2

In the words of Benchmark's @mattcohler, "Our job is not to see the future, it’s to see the present very clearly." /3

Expectations investing involves reverse engineering a company’s valuation by using its current price - a known variable - as our starting point.

We then ask ourselves the simple question: “What has to happen for this price to make sense?” /4

By comparing our views around revenue growth, profit margins, and investment quantities to consensus expectations, we are left with a binary outcome. /5

If our view indicates that consensus expectations are too low and will need to be raised, which could drive stock prices over time, there might be a high probability we can make a profitable investment. 📈 /6

By spending the majority of our time developing our view of these drivers in relation to the current consensus, we know we are staying focused on what matters most. /7

To learn more about Titan's "expectations investing" methodology, check out our latest Quick Thought: titan.com/research/2021/… /8