Sublime

Making money in markets requires having a point of view that is different than what the current pricesuggests. Michael Steinhardt called this a “variant perception.”13 Most investors fail to distinguish betweenfundamentals and expectations. When fundamentals are good they want to buy and when they are poorthey want to sell. But great investors alwa... See more

Investing isn’t an IQ test, it’s a test of character

Thefirst is a fundamental understanding of how a company makes money. The idea is to distill the business tothe basic unit of analysis.  The second dimension is gaining a grasp of a company’s sustainable competitive advantage. A company has a competitive advantage when it earns a return on investment above the opportunity cost of capitaland ea... See more

Keith Stanovich, aprofessor of psychology, likes to distinguish between intelligence quotient (IQ), which measures mentalskills that are real and helpful in cognitive tasks, and rationality quotient (RQ), the ability to make gooddecisions. His claim is that the overlap between these abilities is much lower than most people think.

Investors generate excess returns when they buy the shares of companies prior to a revision in expectationsabout future cash flows. A key determinant of cash flows is a company’s ability to allocate capital toinvestments that create value. The current principles of accounting do a poor job of separating investmentsand expenses, creating a veil that... See more