NOTE: this was a past issue of my weekly newsletter, Timeless Gems. Join my free mailing list so you don’t miss out on future issues.
Today’s gem is this 2017 article called Turning Over The Most Rocks – a short piece on discovering new investment opportunities which includes this quote:
The person that turns over the most rocks wins the game.
– Peter Lynch
One of the things I love about investing is you have to be naturally curious. Curious to learn about new businesses, industries, and opportunities.
In fact, I’d go as far as saying that curiosity, or willingness to turn over many rocks, is a necessity if you want to outperform as an investor. Why?
1) Markets are generally efficient. Great opportunities are rare. There is a lot of capital out there and a ton of smart investors. This makes asset prices generally (though not completely) efficient. So if the market is 99% efficient, that means you have to turn over 100 rocks just to find 1 attractive opportunity.
2) Pattern recognition. The more opportunities you look at, the more patterns you start to notice and the better you get at seeing an outlier. It’s like a muscle, you get stronger and build your ability with more reps & sets.
3) Information Edge. As you build your knowledge bank on various businesses and industries, you start to build an information edge over average investors. If you’re looking at a potential opportunity and have studied the industry before, you may have an upper hand or a differentiated perspective.
All that said, turning over rocks doesn’t mean taking investment action. It just means constantly sourcing ideas/deals, assessing opportunities, and continuing to build your knowledge bank.
At Atlasview, we look at hundreds of acquisition opportunities each year and pull the trigger on only a handful. We constantly keep our deal pipeline full and stay busy speaking with potential targets, industry professionals, and investment bankers. As per the article, we wait for our fat pitch while we go to bat as many times as possible.
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Peter Lynch was probably one of the first investors that I had really admired. He ran Fidelty’s Magellan Fund between 1997 and 1990, and averaged an annual return of 29.2% during that time period. AUM grew from $18m to $14bn under his tenure. He’s written several practical books on value investing, including One Up On Wall Street ( one of my favourites).
