Process is the winner, stocks are just the tools

Let’s start with this question , is your edge the ability to do very deep research in a business or ability to recognize patterns across sector agnostic business where stocks are mere tools to gain that return but value can be created because patterns repeat themselves in cycles ?

I think the second one creates far more value , I see many folks who can do a very detailed deep dive into businesses but then limit their scope of reading newer businesses because there is a tradeoff between coverage depth and breadth , but the answer in my opinion lies somewhere in the middle , an uncomfortable middle that isn’t explored enough , deep diving into a business more than required gives the illusion of full control , not going deep enough feels risky with the ambiguity , both are right but both are wrong too , the answer is in the middle.

The answer lies in the ability to see patterns , over and over again that re enable better returns , industries change , sectors change , businesses change but the nature of capital , optionality and risk reward does not change . These patterns in the nature of capital do not change ,

To be a bit cinematic here and quote a line from the movie Oppenheimer:

“ Algebra's like sheet music, the important thing isn't can you read music, it's can you hear it. Can you hear the music, Robert?”

The most beautiful thing about patterns are they do not change nature , they change the way of revealing themselves , this is fundamentally very important to understand. Patterns tend to repeat in time cycles and with a certainty that seems difficult to fathom , patterns repeating and playing out in the markets happen far more than what we can understand or track , but to know that patterns is what we look for makes it easier

Patterns on :

1. Industry capital structure shit ( Tailwinds /fundraise/Global context )

2. Incremental capex into better margins businesses

3. >5% Topline on R&D

4. Market share gains

5. Capability depth additions with J curve possibilities

6. Capacity +Capability approach

7. Keep including optionality as high risk bets , how ever low the odds are

8. Think like a $10B market cap company actually being a $2 B market cap

Sectors change , but these remain same

This with Intuition to see and track real rate of change when companies have trajectories leap’s in the earnings is what enables alpha. The role of building a stronger intuition in investing is crucial , and this intuition usually comes from repeated patterns in disorder of connecting the dots Intuition tells you a lot of things at most times, having a process to streamline that intuition into actionable data backed research is something that is very important to make sure we as investors can use that intuition and focus on structured randomness and funnel it down to actionable insight , that then helps re -enabling a positive loop in the mind of creating a strong ideation pipeline.

Now this is the first half of the film , the second half is execution

How much research we do at the end of the day will not matter if we don't learn to be better executors and can participate when the odds are in our favor.

Cycle , entry valuation , sizing and ability to sit , these are not traits that can be learnt , these are are a part of the character we already have in life and is built from our experiences around the way we have lived , and I continue to believe we are as good of an investor as is our character and perspective depth in life , but this has to be thought about , structured and tilted in our favor to bring out the best investor in us .

Yes research is important , but that is half the game , the reality is we are not in the fact collection or data aggregation business ( at least I am not ) , so money is made with conviction , character and ability to generate differentiated insights and bet where the odds and equation favors , execution , execution and execution .

Acknowledging the role of randomness and Luck is something that helps in ways we cannot imagine, we stop worrying uncontrollable variables , look for positive uncertainty and start looking at risk as opportunity , but only a person with the ability to acknowledge the role of luck and using randomness as an edge can strengthen the process

Patterns create winners far larger than we can imagine , we just need to know how to start seeing them in everything around us .