investment thesis creep

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The Wandering TRIP

December 6, 2019

Steven Wood

EXO IM , FCAU , Musings , RACE , TRIP

“Not all those who wander are lost.” JRR Tolkien

One of the most frequent monsters in investors’ collection of nightmares is “thesis creep.” This is when the dynamics have changed to the point where you can barely recognize the original reasons why you invested in the company in the first place. We are witnessing thesis creep in TripAdvisor’s hotel business as we speak.

But as it happens, I also just finished listening to a terrific book, The Beginning of Infinity (thank you to Dan Roller at Maran Capital, if you’re reading this!) in which physicist David Deutsch explains that the fundamental way humans have grown is by generating ideas. Generating ideas doesn’t come from data analysis, it comes from creative, right-brain thinking. As psychologist Gary Klein has shown, insights come when we least expect it, but they come from original thought, not by analyzing data. And those original ideas need to be tested and criticized in order to be validated and improved upon. The beginning of “unlimited knowledge growth,” lies in the concept of fallibilism. Only through correcting misconceptions from the past and hoping to find and change mistaken ideas that no one today finds problematic, can we initiate the process of “unlimited knowledge growth,” as Deutsch writes.

Now, I completely understand that thesis creep could identify subjective bias in an investor, and thus investors are correct to throw a red flag whenever he or she realizes it’s happening. Yet, as psychology Professor Daniel Kahneman has advised, truth seekers who’ve developed a process and an algorithm to help eliminate noise have taken a major step at improving the signal of information coming to that otherwise inherently biased human. While algorithms can help filter noise, the real world is inherently more complex and demands flexibility in judgement. Thus, we’ve found the only way our framework has been useful to us was to demand consistent evolution.

Armed with a honed (and continuously improving) process to eliminate noise, we should be less prone to subjective bias. Our ranking framework has no input for cost basis or initial investment date. It doesn’t consider how well we’ve done. While we keep track of old assumptions, the only thing that matters is our assessment of the current opportunity. The only thing the algorithm cares about is, what is it worth now? It helps us eliminate errors of omission, which is another way of saying it lowers opportunity costs, while also helping us prioritize our time, efforts and portfolio weightings. And everything we own must be continuously justified against the opportunity set.

When Thesis Creep is a Good Thing

Deutsche has posited that the only way to generate knowledge is to continuously evolve one’s thinking. It’s the definition of “thesis creep.” Some of our most successful investments were opportunities where the thesis creeped materially throughout the holding period. When we invested in Fiat, the thesis was similar to our successful investment in Ford, whereby it would consolidate the platforms and engineering efforts with Chrysler, saving significantly on capital spending, and thereby improving capital returns. This surely happened, yet even more of the returns were generated by a secular shift to SUVs and trucks, which powered Jeep’s stellar global performance. Sergio Marchionne himself pivoted on his 4-year investment plans and lowered spending on Alfa Romeo and Fiat to reinvest further in Jeep and Ram. They were very wise moves that powered the stock significantly higher even while the stock’s valuation multiple shrank. Since we still own Fiat through our Exor position, the thesis has once again shifted as it embarks on another merger, this time with Peugeot, and looks set to offset macroeconomic weakness through material cost savings.

Similarly, our investment in Ferrari was based on the company being able to gradually increase production given stretched waiting lists and a more diverse product portfolio. Given incremental profit margins are north of 70%, this was going to be very material for the company’s profitability. It has been, but the real kicker in the past 18 months was the brilliant Marchionne plan to introduce the Icona series. These are re-imagined versions of the company’s past iconic cars. They will be a permanent part of the collection, which brings the singular profit tailwind of a limited edition series to the regular operating profit of the company. By far, Icona will be powering the next few years of results at Ferrari and has already powered the stock to a breathtaking valuation. Icona was a thesis creep.

We could go on and on with positive case studies of thesis creep, as well as a good number of negative case studies, but thesis creep also showed up in our most successful biotech positions, oil & gas positions and in Live Nation, another Liberty-controlled company. In fact, when the thesis changes in a positive way, the same care and attention should be paid to the development and the opportunity should be re-assessed. Although the stock has likely reacted positively, it could have significantly under-reacted to the new fundamental range of possibilities. That’s as clear a buying opportunity as we can hope to have.

If we’re going to hold a stock for multiple years, it’s hard to own something where the opportunities aren’t dynamically changing. But furthermore, we’ve witnessed over a shorter time horizon of just a year or two, it’s actually the developments which the market was least expecting that drive the stock returns. “Of course,” this is true, we would say. Yet, we must also be humble enough to admit, we’re probably not going to be able to legally know that development before everyone else. That means by definition your returns are going to be driven by unexpected events and a changing thesis.

Post Catalyst Investing

Many investors still follow a catalyst-based investing process, whereby they outline the reasons why they will own a stock over a specific time period. More thorough investors might even conduct a “pre-mortem” and imagine all the ways the stock could turn out to be a failure. As signposts are triggered, it catalyzes actions the investor has decided upon at the inception of his investment. The problem with this approach is that stock reactions to catalysts are becoming increasingly unpredictable. Counter-parties are now mostly robots or other investors with a 1-2 week time horizon. If the stock hasn’t positively reacted to your bullish catalyst when it gets announced, as we estimate is the case in a solid majority of catalysts in recent years, should you really sell it? That was clearly part of the original thesis, and when the dreaded thesis creep enters the scenario, most investors will exit a position. But if the developments are positively surprising you in an investment, and the stock fails to reflect it, is the right thing to sell it? We think the right approach is to re-assess the situation with a pair of fresh eyes. You may want to buy more rather than exit in this case of thesis creep.

Of course, we want the thesis-creeping developments to go in the positive direction, as opposed to trending downhill. In our framework, we assess the “preconditions,” that drive performance as the qualitative factors we look at: management, governance, customer satisfaction, employee engagement, among many others. These are the factors that drive performance to the top or bottom end of the range of possibilities. We are unapologetic about being post-catalyst investors, though of course, we can’t help but do pre-mortems and foresee a roadmap of triggers where we think our version of reality will prove the markets’ incorrect and lead to positive or negative surprises.

My friend Chris Mayer recently used David Deutsche’s book to extrapolate another investment lesson: good management teams with significant skin in the game have a way of overcoming the difficulties that are presented to them. They solve problems so the investor doesn’t have to worry about it. In his recent article ( click here to read it ), Chris quoted a pithy answer Warren Buffet made to a question about how closely he follows Apple. “Well if you have to closely follow a company you shouldn’t own it!” Buffett has always demanded management teams with skin in the game and a natural passion for overcoming the problems presented to them.

Another good friend, Bill Carey at Cortland Associates, joked about the perils of thesis creep in saying, “First it’s a growth stock, then it becomes a GARP stock, then it becomes a value stock, then it becomes a turnaround, and then finally it ends with a restructuring story. There’s always a reason to justify owning something.” Bill has avoided thesis creep his entire successful career by lowering the number of variables that drive the business models he invests in. He seeks simplicity, low capital intensity, low labor intensity, and generally less stakeholders that can damage the thesis. A lower concentration of these essential corporate elements reduces the risks that any of the stakeholders’ decisions can change the thesis materially.

That means Bill has done incredibly well by combining both a valuation discipline with business models today that are universally acknowledged to be “high quality,” such as major internet properties, exchanges, payments processors and database companies. The only problem is that while those were viewed as “boring” stocks for much of his career, professional investors have herded into them over the past few years. While many of these stocks seem boring and without a “catalyst,” the herd has correctly realized that the risks of the thesis changing in these companies over time is low. While they’re not risk-free, investors have pushed the earnings yields of these companies close to the risk-free rate of today: essentially nothing. I’ve tried to help Bill, in vain, find opportunities elsewhere, as many of his past favorite positions have also reached breathtaking valuations. It’s likely he’s going to have to familiarize himself better with thesis creep over the next decade.

The wandering TRIP

TripAdvisor doesn’t fit that “quality” mold of having very few thesis-changing risks. While it has hundreds of millions of people who use the site, the monetization channels have historically been very concentrated to Expedia and Booking, and the company has the chronic, now acute, Google problem. One decision by one actor (in this case, Google) can lead to thesis creep. And while we’ve never assumed hotels would be a great business for TripAdvisor except in our most extreme bullish scenarios (<10% probability), we hadn’t anticipated it could lose 15-17% of its business in a shorter time frame.

Our approach to a position that is failing to launch or is performing contrary to our positively-skewed range of outcomes is to throw out all of our old assumptions. We have to re-underwrite the investment with a completely fresh set of eyes and assumptions. Chris has taken time to come up with his own assumptions on TripAdvisor, and while they diverge from my assumptions from earlier this year, we both ended up at the same outcome a couple of weeks ago: the company can digest “ The Google Squeeze ,” and still capitalize on the very important and significant addressable markets of Experiences and Dining in addition to the advertising monetization potential.

As we detailed in a new research note to our investors this morning , Google has moved to aggressively eliminate unpaid links from its hotel search results pages, despite nearly half of this traffic including the word “TripAdvisor” in it. We could hardly characterize this as user-friendly and it risks turning the company’s valuable search tool into the yellow pages. Yet, we now assume that up to 16% of the company’s revenue (the total revenue generated by this free traffic) could be eliminated over the next few years. We had previously assumed this SEO traffic was defensive, and now we only believe half is. This development has resulted in a creeping thesis at TripAdvisor.

But as opposed to mindlessly selling something due to “thesis creep,” we decided to purchase more shares after we completely re-assessed the situation. Half of the company’s revenue is growing north of 25% going forward, which combined with cost cutting plans, allows the company to continue growing profitability much more quickly than consensus estimates. The management of the company over the next few years will determine whether or not this was a good move. The future is in the hands of a very capable board and a very entrepreneurial CEO. TripAdvisor CEO Steve Kauffer has a great reputation in the travel industry, but perhaps not on Wall Street. True greatness is born of difficult times, so the next couple of years will determine whether his travel industry or Wall Street reputation survives.

This Process Has Already Worked

At the beginning of the year, we wrote “ Boiled Frog Prevention ,” in which we talked about our then most recent mistake, Flybe. The opportunity had been a slowly deteriorating situation where dramatic downside deviations had emerged. With the emergence of Brexit, we had focused on the passenger weakness and figured it was digestible. Instead, we should have focused on the fundamentals completely out of the company’s control: foreign exchange. The company’s cost base heavily skewed to US dollars but it could only sell tickets in pounds. A most material development happened over our holding period, but we under-reacted to the development. This led to a process improvement at GreenWood whereby a new set of eyes must completely throw out the old assumptions on a stock if it fails to perform in line with prior assumptions.

As it happened, we had a new set of eyes join the company just months before, and Chris re-underwrote Flybe, Telecom Italia, and Piaggio. Our mutual conclusion from that exercise was to sell Flybe, locking in a ~50% loss rather than the 99% loss that materialized over the next couple of months, continue to hold Telecom Italia, and actually buy more of Piaggio. All three decisions have turned out to either add alpha for us this year, or save us from a worse loss. Prior to Chris re-underwriting TripAdvisor a few weeks ago, he re-underwrote our coinvestment this summer. The process only reinforced our conviction in the opportunity and allowed us to buy more before we became restricted. It’s still early days, but it turned out to be the exact right decision. However we admit, the thesis didn’t really change in all of these scenarios, it was more a “failure to launch.”

In trying to eliminate human bias from decision making, many people find it easier to rely on rules of thumb or checklists. They help investors avoid past mistakes when they overlooked something material. We’re human and have flaws. Checklists won’t let you overlook anything material as, can often happen. Yet, as popularized by Atul Gawande, checklists are designed to work even when the pilot or nurse doesn’t have their full faculties present. It should work even when they are exhausted from working over 12 hours. Because the downside of their mistakes have life-changing consequences.

Investing is not an unconscious process, it’s a highly conscious process and should be the start of “unlimited knowledge growth,” as David Deutsche puts it. It should be one where we constantly challenge assumptions, particularly when our views diverge from Mr. Market’s. We call this the “expectations gap,” and have focused on building out this behavioral aspect of our ranking framework. Our greatest mistake this year was not being aggressive enough on position sizing even when this expectations gap shrank in TripAdvisor and a couple other positions. We cut TRIP in half this summer, but we should have clearly cut it further.

Could we suggest a new way to view thesis creep?

Perhaps we let it trigger a complete re-evaluation of the opportunity on a go-forward and unbiased basis rather than causing us to run for the hills, as most other well-trained investors do. And we should do this re-evaluation when both a positive thesis creep occurs as well as the negative ones. The conclusions with a fresh pair of eyes may surprise you. The minute that you can’t stand to look at something is usually the moment every other investor can’t stand it either and is capitulating. Do you really want to be that guy? We’d rather be on the other side of that trade in the price-agnostic selling.

We realize this view may be controversial and you may have strong opinions against it. We’d love to hear from you if you do. We’re more concerned with being right than sounding right. In fact, by proving us wrong, you’ll be helping us creep another thesis!

Disclaimer:

This article has been distributed for informational purposes only. Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to invest in any investment product or strategy related to such securities or assets. It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this article. Persons reading this article should seek professional financial advice regarding the appropriateness of investing in any securities or assets discussed in this article. The author’s opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources. Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed. Investment accounts managed by GreenWood Investors LLC and its affiliates may have a position in the securities or assets discussed in this article. GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC.

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Active management has historically been cyclical, and we believe this remains true despite the fact that excess returns have compressed over the last 15 years.

Passive investing has its risks, which are even more heightened in today’s market environment.
Leading active core equity managers consistently outperform, despite the fact that it has become increasingly more difficult to do so.
At J.P. Morgan Asset Management, our ability to utilize scale effectively, develop an integrated set of research capabilities and foster a strong culture drives our long-term outperformance.
We offer the full spectrum of active U.S. core equity solutions across a variety of investment styles and risk profiles. Top decile information ratios across all strategies in our suite underscore our commitment to efficient use of risk capital, which is especially important as we enter a new market environment regime.

Active managers have outperformed, but excess returns have compressed

As illustrated in the following chart, excess returns in large cap stocks have historically been cyclical. While we believe this is still the case, it has become increasingly difficult for active managers to outperform the index. During the period prior to the Great Financial Crisis (GFC), the average top quartile manager in the large cap core space – the largest U.S. equity category – was able to generate a 3.32% excess return. However, since then, the average three-year excess return has compressed to just 1.35%. In addition to lower returns, the percentage of managers who have been able to outperform has decreased from 61% pre-GFC to 47% post-GFC.

The compression of excess returns and number of managers able to outperform is, in part, attributable to the unique environment produced by unprecedented government stimulus. From December 2008 to March 2022, the Federal Reserve maintained the target fed funds range at zero for the longest period of time in history. The target rate reached a peak of only 2.37% in December 2018, before it was swiftly cut back to its historic low in early 2019. In addition to the low rate environment, the Federal Reserve enacted four tranches of quantitative easing to further spur economic growth.

This combination had notable implications for equity valuations and the broader U.S. stock market. The availability of low-cost borrowing kept many companies afloat, while lower discount rates of future earnings made the broader equity market more attractive. These market distortions created an environment where investing fundamentals were not the primary determinant of market performance. Thus, active managers were challenged to outperform. This trend prompted many investors to move their core allocations into passive strategies. As such, passive managers are now the dominant players in the large cap core category, with a current market share of 79.5%.

Passive investing is not without its own risks

Even though excess returns remain compressed today, the market environment has changed. Interest rates are higher and market leadership is narrower, which has led to increased index concentration, now near multi-decade highs. This means that passively investing in the S&P 500 Index is an active decision, which introduces less obvious, but impactful, risk into portfolios. Investors who remain in passive may be caught off guard as we gradually move into a normalized rate environment – distinct from the zero-interest rate policy environment of the last decade – and see broadening of returns based on fundamentals.

As illustrated in the following charts, since the beginning of 2023, 86% of the S&P 500’s returns were attributable to the 10 largest companies in the index. Those companies dominating market performance now constitute 32.5% of the index’s market capitalization, significantly above the long-term average of 21.6%. Relative to the total index, this cohort is valued at a premium with its forward P/E ratio at 148% of the index level. Following this strong performance run, not only are valuations elevated but also analyst expectations are as well. Although it is true that these companies have generated strong earnings growth as a cohort, they are not monolithic.

Conversely, the remaining 490 stocks in the S&P 500 are valued at 92% of the index level. This dislocation underscores the importance of active management for two main reasons:

In a market with such extreme concentration, managers must be highly selective in their positioning to avoid the risk of being caught betting on yesterday’s winners.
In a new interest rate regime with less capital liquidity, there will be greater differentiation of company performance, providing ample opportunity for stock selection in both the top 10 and the other 490 companies to drive returns.

With this inflection in market dynamics, active management should allow for investors to take advantage of both of these phenomena, while passive investing simply introduces hidden risks.

Leading active managers consistently outperform

Although active managers have been more challenged on the surface, leading managers continue to deliver healthy alpha for their clients. Historically, long-term equity returns are driven by earnings and dividends, while short-term returns are driven by P/E multiple expansion as a result of market sentiment, company news or emerging themes. An experienced active manager focuses on fundamentals – long-term earnings and growth – to drive stock selection and continually monitor risk.

What defines a leading active manager?

Despite headwinds for the active large cap core category, we believe the ability to utilize scale effectively, develop an integrated set of research capabilities and foster a strong culture enables us to be one of the leading active managers in the industry. At J.P. Morgan Asset Management, our global platform exemplifies and integrates each of those characteristics, which allows our active managers to uncover winning stock opportunities and deliver alpha to our clients over the long term.

With $835 billion in client assets under management 1 , we are committed to using our vast global resources to produce the highest quality research.

Our research platform, spanning four continents with 80 dedicated analysts covering 2,500 companies, provides our analysts with both a local and global perspective on the sectors they cover.
With an annual global research budget of over $150 million, we are able to recruit top talent and provide our analysts with the best resources available. This investment in data and talent underscores our commitment to continuing to produce leading insights.
Our large presence in the equity markets creates a unique level of access to company management teams, enabling our analysts to host over 5,000 management teams per year and share the insights they glean globally.
To enhance the knowledge transfer process and create efficiency, we have a harmonized investment process. This means that our analysts and portfolio managers are speaking the same investment language, no matter what country they sit in.

Over the last four decades, we have developed an integrated set of investment capabilities, which generates leading bottom-up, research-driven insights.

We use a “Strategic Classification” assessment to consider the qualitative fundamentals of each company. The economics, duration and governance of a business are examined to limit risks that may be overlooked by a purely valuation-driven process.
We then have a five-year “Expected Return” framework to consider valuation. Each analyst uses their proprietary earnings and growth estimates to forecast company growth through the full business cycle to the end of the forecast period. This process derives a valuation multiple, which is then used to group each company in each sector into quintiles, from most attractive to least attractive. The “Expected Return” process creates a consistent valuation framework across the investment universe that is leveraged by our portfolio management team.
Since 1987, our top ranked (undervalued) stocks have outperformed the market, while our bottom ranked (expensive) stocks have underperformed.

Our culture is built upon the tenants of continuous improvement and partnership

We consistently re-evaluate our processes and look for areas of improvement to avoid complacency. An example of a recent enhancement is the introduction of “Pre-determined Game Plans.” While launching coverage of a company, an analyst creates a one-page document explicitly summarizing the investment thesis, business thesis, thesis threats and potential signposts. This practice encourages honesty in the investment process and limits thesis creep.
The partnership model between our analysts and portfolio managers further differentiates us from other managers. We treat the research analyst role as a career position, not a stepping stone. Our analysts manage risk in their own sector-specific portfolios and they are compensated as such. This cultivates more honest and curious conversations to drive our leading insights.
Our portfolio managers are assessed on a blended 3-, 5- and 10-year performance metric, encouraging analysts and portfolio managers to commit to our process and maintain a long-term focus.

J.P. Morgan’s active core solutions

A strong research platform forms the foundation for leading actively managed investment strategies that have a proven ability to generate excess return over a range of market cycles. Depending on the preferred risk budget, J.P. Morgan offers a full spectrum of active U.S. core equity solutions across a variety of investment styles and risk profiles. Top decile information ratios across all strategies in our suite underscore our commitment to efficient use of risk capital, which is especially important as we enter a new market environment regime.

U.S. Research Enhanced Index Strategy (100 & 150)

Managed within a tight tracking error budget (max 1% or 1.5%), we keep each strategy’s risk characteristics close to the S&P 500 Index, seeking to minimize style, sector and factor impacts.

U.S. Analyst Fund Strategy

Managed with a reasonable tracking error budget (2%-4%), our Director of Research collaborates with our research analysts to deliver a best ideas portfolio.

U.S. Large Cap Core Strategy

Managed with a reasonable tracking error budget (2%-4%), our portfolio managers aim to develop insight, conviction and valuation support to holistically construct a balanced core portfolio.

U.S. Large Cap Core 130/30 Strategy

Managed with a slightly higher tracking error budget (2%-5%), we combine a long only and extension portfolio to create a 160% gross and 100% net exposure, while maintaining a beta one exposure to the index.

Investing Lessons from Will Danoff: A Visionary Fidelity Fund Manager

Will Danoff is a name that resonates with all investors, mostly long-term investors. He has been managing Fidelity’s Contrafund since 1990. Danoff has guided one of the world’s largest actively managed funds, with growing assets under management (AUM) to over $300 billion.

But what makes Danoff such a visionary investor? Let;’s find out.

Who is Will Danoff?

Will Danoff has been Fidelity Contrafund’s portfolio manager for over three decades. Known for his long-term investment style, Danoff focuses on finding companies with high growth potential and quality fundamentals. He believes in combining thorough research with a focus on long-term growth. He truly creates a blueprint for investors.

He recently gave an interview to Conch Shell Capital and shared his investing knowledge. Let’s understand his investing lessons and why they matter:

Investing Lessons from Will Danoff

Below are eight of Will Danoff’s most important investing lessons:

1. Quality Over Price

“My grandfather was in the sweater business, and they used to say the price is forgotten, but the quality remains.”

Will Danoff believes in investing in high-quality companies, even if it means paying a premium. Much like a well-made sweater that lasts for years, quality investments often offer longevity and resilience. He suggests that buying a high-calibre stock can be a smart move, as such companies are likely to grow over time. The lesson here is to choose on quality over cheap prices, as the long holding period and performance of solid companies can ultimately pay off.

2. Stock Prices Follow Earnings

“Stock prices follow earnings per share. If a company doubles its earnings in the next four or five years, the stock price is likely to double too.”

Danoff tells us about the importance of earnings growth, noting that stock prices are often a reflection of a company’s ability to generate profits. For investors, this means that finding companies with strong and consistent earnings growth can be a major strategy for improving returns. By estimating earnings growth, you can foresee stock price appreciation.

3. Know Your Reasons Before Buying

“I like to write down why I’m buying this stock… it helps prevent thesis creep.”

Danoff keeps his investing disciplined by writing down his rationale for each purchase. This habit of documenting helps keep emotions in check, ensuring he sticks to the original investment thesis. It’s a strategy that helps prevent “thesis creep,” where investors might shift their reasoning for holding a stock over time, potentially losing sight of why they bought it in the first place.

4. Listening as a Competitive Advantage

“My competitive advantage is to listen.”

Danoff’s edge comes from paying close attention during company meetings. He devotes himself to details that other analysts might miss. In a time where everyone is glued to screens, he advises that sometimes listening carefully can tell what you wouldn’t find in data.

5. Know When to Sell

“Sell a stock when the fundamentals deteriorate. But a better reason to sell is when you have a better idea.”

He explains that selling isn’t just about cutting losses; it’s also about reallocating capital at better places. If a company’s fundamentals fall, it might be time to sell, but an even stronger reason to sell is when a superior investment idea presents itself. This method helps maintain a portfolio full of promising opportunities rather than lagging stocks.

6. Strong Offence is Good Defense

“A good offence in our business is a very good defense.”

His theory for a proactive approach is to continue seeking high-growth companies. This philosophy serves as a form of defense, as these companies often outperform market downturns better than others. For new investors, the major thing to remember is that building a strong portfolio with companies of higher growth scope can be a way to protect your investments over the long term.

7. Mistakes are a Part of Investing

“Mistakes are part of life. Mistakes are a huge part of investing.”

He views mistakes as inevitable and sees them as learning opportunities. Every investor, regardless of experience, will make errors; the key is to learn from them. This attitude can improve your future investment decisions and remind you not to fear setbacks.

8. Hard Work Outperform Opportunities

“The harder you work, the more opportunities you find.”

Lastly, Danoff suggests that due diligence in research helps you uncover opportunities that others might miss. His point here is clear: Thorough analysis and hard work can give you an edge. If you’re willing to put in the effort, you can spot growth companies early and gain an advantage over those who rely solely on surface-level information.

Wrapping Up

Will Danoff’s investing approach is both visionary and practical, especially for those looking to build wealth over the long-term. Using these lessons in your portfolio, you can not only improve your portfolio’s quality but also gain confidence while making investment decisions.

His lessons remind us that successful investing is not just about finding the right stocks but about being patient and learning from your mistakes.

Will Danoff is Fidelity’s portfolio manager for Contrafund segment. He is known for his unique investment strategies and focus on long-term growth-oriented companies.