We recognize that sometimes precedents are irrelevant, or worse, misleading. Creativity and courage, the determinants of long-term investing success, are required. Countervailing forces are nearly always obscure at the beginning, and intuition and instinct are the partners of facts, figures and models.
The challenges in building stock selection models have multiplied as globalization has changed how the pieces of the puzzle fit together, and as traders have come to outnumber investors. The power and direction of some trends have exceeded what’s come before, and systematic underreaction to current information, long an investable anomaly, has largely disappeared. Models must be more dynamic and adaptive than before, and in the end their value lies in the sophisticated melding of disparate signals. As the number of practitioners has multiplied, the need for continuing research and informed judgments has gone up. We don’t ever expect to find an inclusive, unified theory of investing, rather we believe that it’s the integrity and intensity of the research process that leads to success. In the end, effort = outcome.