There’s a famous anecdote (I think it’s from One Up on Wall Street, but I could be mistaken) about an analyst who knows everything there is to know about a company (I believe the company is Clorox, but again I could be wrong). This analyst knows the economics of his company down cold, and I don’t mean in a “their EBITDA margins are 10.4%” type of way. The analyst has spent so much time on the company that they can accurately estimate profit margins that the company doesn’t come close to disclosing. So, for example, the analyst could tell you the margin difference between two different products in the same line (assuming it’s Clorox, they can tell the difference between, say,
Good post. We have two sayings that rhyme with this theme:
1. Reduce the idea to a < 100 IQ and execute. We borrowed this from another successful fund manager. It keeps us from getting getting too much in the weeds.
2. We often find ourselves catching one another saying, we are "too close" or "too deep" or "too in the weeds of the model" we correct ourselves by taking a step back and asking, "what's the opportunity."
Great post. Sometimes it's better to hold your nose and follow your contrarian instincts, even if that takes you into less familiar territory. Other times, as Buffett likes to say, "If you are in a poker game and after 20 minutes you don't know who the patsy is, then you're the patsy."
Good post and food for thought