Updated Strategy page to include our trade setups

As traders we’re looking for systematic mistakes repeatedly made by other market participants. When we find these mistakes, we build nets and go fishing for trading profits.

Potential investing mistakes in equity markets

  • Thinking short term (< 2 years) instead of long term (2-10 years). Proven by Warren Buffet to be the biggest persistent mistake.
  • Undervaluing intangible assets (brand value and goodwill especially brand monopolies like “Netflix and chill”)
  • Undervaluing impact or adoption of new technology (Google, Microsoft, Apple, Bitcoin)
  • Undervaluing first mover advantage of new companies or new products
  • Overvaluing potential returns based on the performance of similar stocks

Potential trading mistakes in equity markets

  • Index or sector buying/selling hits specific single stocks harder than others (usually during mini-crisis)
  • Under-reacting to good news that permanently raises earnings/revenue expectations (a second year of positive revenue growth may cause the street to price in 5-10 years of revenue growth, e.g. TSLA)
  • Over-reacting to bad news that doesn’t affect the bottom line in the longer term

Core Setups We Trade

(1 trade per year per theme, usually identified 3mo in advance)
Recurring events (monetary policy, earnings of hot stocks, political events)
  • Make 90/10 market in expectation range leading up to the announcement
  • Timeframe is usually the period between announcements
(1 trade per year per theme, identified 6m – 1yr in advance)
Tail risk or crisis risk
  • Find rumours in news headlines that aren’t priced in and seem unlikely
  • Find asset with free implied exposure to potential tail risk
  • Timeframe depends on the tail risk, historical examples have been monthly/quarterly
(1 trade per year per asset class, identified when news seems like WOW its a crisis)
Pure Value
  • Discount to intrinsic value
  • Timeframe of 1-2years
(1 trade per year per asset class, identifiable when first news breaks after consolidation)
  • Revenue growth, sustainable margins, decent ROE
  • Trend follow

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