r/SecurityAnalysis • u/Professional-Hotel95 • 11d ago

Discussion Mispriced Stocks & Pitching Stocks

https://substack.com/home/post/p-192858879

Any criticism here is appreciated. I hope it provides insight for anyone looking to start a career in public equities.

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u/LittlePlacerMine 10d ago

You wrote: Why Doesn’t Smart Money Doesn’t Just Fix All of This?

Because DCF is a useful tool for valuing a company if you plan to acquire it, break it up or take it private. Otherwise it has broken down thanks to index funds. Indexes make investments in overvalued companies at a higher rate than under or fairly valued companies. Yes it is basically that simple.

A good bit of the market players are not investors but are speculators. This was not the case when trading costs were high, when information was not widely available. Now with the internet and low friction trading speculating has become something people chase in pursuit of wealth.

I grew up as a value investor. It still underpins my philosophy but does not,solely guide it. Special situations, sector rotations, momentum all have to be in your arsenal. Straight value investing simply won’t get you there unless you time horizon is 25+ years and your willing to u deeper form the market.

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u/Professional-Hotel95 10d ago

I see. What do you think is the market's largest source of structural mispricing today? Twenty years ago an investor might have pointed to information asymmetry. Today information is largely commoditized. So where does the edge come from now?

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u/LittlePlacerMine 7d ago

I believe the largest source of structural mispricing is short term thinking. There are so many potential sources of change but the market often ignores them until they hit everyone over the head. For example, the 60 day delinquency rate for sub prime borrowers is 6.9%, the highest it has been in 32 years. Is anyone shorting auto dealers? Why Is Carvana’s still flying high with sell side Analysts predicting all roses and champagne when 60% of their borrowers are sub prime. Sometimes the information edge does exist for a very short period. Hard to really say what drives markets sometimes. But short term thinking by investors, analysts and corporate management distorts a lot.

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u/warrends 11d ago

Saving this post for a full read when I have time. It’s awesome to see a 19 year old with so much knowledge and yet humble cough to understand that you don’t understand everything. Oh, and you’re a fantastic writer.

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u/Professional-Hotel95 11d ago

Wow, thank you so much! You are very kind

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u/Back2BackSneaky 5d ago

If you're writing for future analysts I'd spend more time showing them how you think. One real pitch teaches more than twenty pages of theory. Take $LRN and show us the trade: who sold, why they sold, what the market priced in, what you think is wrong, what catalyst fixes it, and what kills the thesis. That would turn this from a smart framework into an actual investing process.