Pattern Recognition 101

The Power of Utilization

A frequent question we’ve received over the years is how do you source your ideas? It first started with institutional investors when we were at FrontPoint or Seawolf and it has resurfaced recently with WAWD subscribers. It’s a great question and one that I’ve been thinking about recently.

While every idea has its own personality, recently I’ve started to categorize our ideas and make more sense of our chaos. My 35-year-old self would have bullshitted some answer that sounded institutional, but now my answer is much clearer. Unlike my physical skills, my skills as an investor have improved over time. Sadly, my intelligence has not improved but longevity in this business has allowed me to dramatically improve as an investor. Cumulative experiences, mistakes, and successes have shaped me. My pattern recognition has gotten a lot better, and I’m mentally much more aware of those patterns. I’m not talking about market cycles (a whole different discussion), but more bottom-up single stock idea generation.

While every idea has its own personality, recently I’ve started to categorize them to make more sense of our chaos. Our stock ideas usually fit into distinct buckets. There are so many variations we rely on that we thought we’d start a series on ‘Pattern Recognition’ and see where it goes. I hope this helps contextualize our idea generation and helps you think about your own habits and patterns.

Today’s topic: Utilization