How can you gain an investment edge in the stock market? Edge is an elusive but crucial concept in investing. Without it, you might as well buy a low-cost index fund. In addition, investment edge can be temporary or sustainable. The latter represents the goal of investment managers — to obtain sustainable competitive advantage by developing an investment edge that can stand the test of time. In my exclusive interview with highly regarded value investor Robert Robotti, President of Robotti & Company, Bob reveals three sources of investment edge and cites several real-life examples. The full interview is available below as an episode of the Value Investing Podcast.
Investment Edge: The Three Key Sources
In the conversation, Bob Robotti discusses the following three major sources of investment edge:
- Information edge: Gathering a significant amount of data on a company or industry, which allows an investor to put together a “mosaic” that provides unique insight
- Analytical edge: Processing the data in a way that allows for unique and actionable insight, either through possession of a superior model or superior judgment
- Behavioral edge: Acting in a way that allows an investor to tune out the market noise and act rationally when other investors are exuberant or fearful
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