r/stocks Mar 29, 04:25 PM
Be honest, do you have an investing edge or just a good streak? + My view on having an edge and does it exist? Most Most investors focus on trying to gain information that others don’t have. Short-term information might help with predicting quarterly earnings surprises, but it isn’t much of an advantage in determining the long-term value of a company. The edge that the information provides isn’t much of an edge, especially given the wide availability of easily obtainable information in today’s market with all the available (AI) screeners. So much focus is on the short term and so much focus is on trying to gather information before the market. This creates an advantage for investors who choose to focus on the time-horizon advantage. You need to have the willingness to view the business through a different lens than the majority of investors.
From my view, a sustainable edge comes from a likely increase as investment time frames continue to get shorter and shorter. The average investor holds a stock for about close to 6 months according to data from the New York Stock Exchange. This represents a significant shift toward short-term trading compared to the 1950s and 1960s, when stocks were held for an average of over eight years. Therefore, this hyper-focus on generating short-term results will help to increase the edge for those who are willing to buy good companies with no clear reason for why the value exists or certainty for when the market will correct the value. Stock prices move much more than intrinsic values. Intrinsic values do not fluctuate (on average) by large amounts in any given year, but stock prices do. This means that sometimes stock prices become disconnected from their fair values. This volatility is important, as it creates opportunities where stocks can stay cheap for longer than you expect, and then can become repriced much more quickly than you expect. Large-cap stocks can fluctuate much more than their intrinsic value does than most people think. Look at what has happened in the past couple of weeks. Some business were overvalued and reverted back to their mean whilst others dropped lower than expected and became undervalued. Long-term-oriented investors who are willing to buy into a certain short-term outlook can purchase stock in a well-capitalized, stable business at really cheap prices relative to normal earning power.
There is an advantage for those investors who are willing to buy good companies when general market conditions or company-specific conditions are pessimistic. The edge is less about knowing more than everyone else about a specific stock, and more about the mindset, the discipline, and the time horizon that you bring as an investor. If you can capitalize on this mindset, you can give yourself a significant edge in the stock market.
submitted by /u/JR-FlowCapGroup
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