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
About Bob Robotti
Robert Robotti is the President of Robotti & Company. Prior to forming Robotti & Company, Incorporated in 1983, Bob was a vice president and shareholder of Gabelli & Company, Inc. He worked in public accounting before coming to Wall Street and is currently an inactive CPA. Bob holds a BS from Bucknell University and an MBA in Accounting from Pace University. Some of Bob’s areas of coverage include Special Situations, Energy Industry, Property-Casualty Insurance and Banking. Bob is the principal of the managing member or general partner of several investment vehicles. Bob currently serves on the Board of Directors of Panhandle Oil & Gas Company, a NYSE-listed diversified mineral company located in Oklahoma City; on the Board of Directors of Pulse Seismic Inc., a seismic data licensing business located in Calgary, Alberta; and on the Board of Directors of Build with BMC, a privately held company specializing in building materials and construction services throughout the United States. In addition, he serves on the Boards of many non-profit organizations where he generously donates his time and expertise. Previously, Bob was a member of the Securities and Exchange Commission’s Advisory Committee on Smaller Public Companies, established to examine the impact of Sarbanes-Oxley Act and other aspects of the federal securities law.
Value Investing Podcast – Episode 12: Investment Edge
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