"The important concept to understand about profitable investing is that you have to have a strategy that others are not also using."
People always say this, but it doesn't make sense to me.
If I go to the grocery store and buy produce, and I assume I'm not more knowledgeable than an expert purchaser for a food service business, then am I necessarily better off buying stuff at random without even looking at it? If I'm really clueless, can I not learn to choose good stuff by examining it and trying it, and finding out what other people look for?
The problem, I think, is that when people are looking for a way to beat the market, they, pretty much without exception, look for ways to process the predigested information about a select group of companies that is already in a structured form. That stuff is the information that's most absorbed into prices, so why not stop "looking for your keys under the streetlight"?
Precisely because the market is very efficient at pricing everything that people can quantify, you don't have to quantify much at all! If you can tell rotten fruit from fresh, then you are adding value and you can assume that everything that you find difficult to evaluate is already factored in.
What if you just spent 10 seconds looking at each business description of a public company's 10-K? Instead of looking at numbers at all, just treat your investing like you have a stack of several thousand resumes and you need to hire 20. Of course, you want to look at some numbers later on before buying, just like doing a background check on a prospective employee, but just looking at a broad cross section of what's out there is enough to observe really obvious and educational patterns.
Here's something I read in a 10-K recently:
"In July 2014 as part of a diversification strategy we acquired companies engaged in the manufacture and marketing of electro-hydraulic servo-valves and the development of optical fiber hardware and software solutions for the security and protection industry. However, in the fourth quarter of 2015, we decided to focus on our hog farming operations, sell our operations in electro-hydraulic servo-valves and optical fiber based security & protection and seek to grow through internal expansion and acquisitions of businesses in the agricultural industry."
Now, if the market is efficient, and I am not an expert in hog farming, servo valves, or investing then how can I tell if this company is a better or worse bet (at the current price) than, say, Apple?