Competitive Advantage as an Investor

“Good investing is a minority sport, which means that in order to earn returns better than everyone else we need to be doing things different to the crowd.” - Nick Sleep (Nomad Investment Partnership)

Bill Miller, a renowened successful investor, argued that there are three competitive advantages in investing:

Informational Edge: You know some meaningful facts about specific companies or sectors that very few in the market know. You use that information to buy early when the market ignores the stock or sell/short before the stock price tanks.

Analytical Edge: You have the skill to decipher public information and find unique insights for profitable deal that market has ignored.

Behavioral Edge: You have the emotional resilience to make decisons based on logic and ignore the herd mentality. You don’t take market as a fact and keep your emotion at bay. You have the patience to let your investment thesis materialize in the market. You find good bargains in the time of panic and sell or stop participating when the market is euphoric.

Among these, analytical and behavioral edge are sustainable competitive advantages.