Phil Pearlman on His Market Strategy

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While I’ve applied multiple strategies over the past 15 years, the one common theme and the one that has created the most wealth has been identifying massive trends which are occurring with an expansive time frame. The goal is to make an informed bet and manage it rationally over time.

Whether it is the internet, laser eye surgery, war or inflation, I seek to identify massive trends that are in the early stages of playing themselves out and that will grow in public awareness and intensity as they develop over the course of an extended period of time.

People are only slow to process new information and to integrate it into their investments. This is the trajectory of information and noise and it is the place opportunity awaits. As others wake up to the implications of new trends, they jump on board. Then, still more follow, and by the time the trend is fully understood by the investing public, the corresponding equities have not only gained significantly in value but have usually increased well beyond fair value.

With every new massive trend, there is often an obvious way to play it. Many times, this is just fine and plenty of wealth can be created. Often, though, the largest and most obvious plays are also the most complicated, the first to get crowded and have the most attention already on them.

This is why the best of the best massive trend plays go one step further to find lesser known companies that have even a higher level of inefficiency.

As public awareness of massive trends grows, so does the noise. People come out of the woodwork across a variety of venues voicing strong opinions usually with motivations that are disconnected from truth discovery and inaccurate.

Source: Chapter 44 – Massive Trends and The Trajectory of Noise by Phil Pearlman, @ppearlman

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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