Smallcrap
About a year ago, I met this Californian in those floral beach shirts with a business focused on small caps. To this day, small caps still suck. You should think of small caps as if they are in the realm of private equity or VC, in which those who most to gain are the insiders.
Because of the illiquidity of big bid-ask spreads and volatility of earnings. People become little investor relations cheerleaders the more they get into the sunk cost fallacy.
Additionally, this sunk cost fallacy gets one mentally distracted from really identifying if one has an edge or not. Because a real edge, like it or not, has some linkages to timing.
It is timing that will prove a thesis correct or not, and if the thesis is correct but the timing is off, that doesn’t count or shouldn’t count from an ROI standpoint.
Let me give an example of my timing being off - last year I came to realize that all Apple product categories should decline specifically since there is no USP if one takes ‘Apple intelligence’ out of the equation.
For the rest of the year, the narrative and marketing presented otherwise. Until the truth came to light recently. As Apple made new highs with earnings coming out, the only saving grace was the announcement of a potential trade war.
It was the trade war and some realization of how stale most of Apple’s product refreshes really are that finally put some pressure on the stock. Yet, to Apple’s favor, the realization of these ‘truths’ gave the company time to pivot out of the lie of Apple Intelligence and to leak upcoming releases in time for fall ‘25.
You can have an idea and be absolutely right, yet it can still take some time for the masses to realize. That time is critical because you also need to be astute enough to understand how the market will come to some of the discoveries as you have made.
If you notice, throughout this Israel-Iran conflict I have never stated terms like WW3 or long oil. The only thing I have stated is that LMT is good. The last week I showed my hand - I suggested a time in which Israel would make its first strike.
I stated also stated that US intervention in the conflict is bullish.
Finally, I told you it was theater.
As the market bottomed.
This is an example of a catalyst being the primary driver with pin point timing.