Every investor has a unique style. A signature. A set of opinions learned from a lifetime of winners, losers, and neither here nor there-ers. At any point in time, the cumulative experience of an investor is reflected in their portfolio. This makes a portfolio so much more than a bunch of assets. A portfolio is an assortment of opinions about the world and the future.
Cynics will try and convince you that investing is just a zero-sum game. An inconsequential waste of time. Would you believe me if I told you that those cynics are wrong and that the opinions of investors matter?
No? Alright then, let's conduct a thought experiment.
What do you think would happen if all the investors in the world agreed that oil & gas businesses were worth half of what they were yesterday whilst renewable energy businesses were worth twice as much?
At first, not much. Performance would flow from the losers to the winners - zero sum - and ESG investors would be heralded as geniuses on CNBC.
But as time goes by strange things start to happen.
Renewable energy companies are more incentivized to raise capital through secondary offerings. These could be dilutive if new shares are issued or non-dilutive if the shares are sold from the company's reserve of authorized shares. Whilst the impact to shareholders would be different, the effect to the business is the same - they have more capital to spend. 4x more capital than oil & gas companies all else being equal. That means relatively more wind farms, solar fields, and hydroelectric dams get built than oil rigs and refineries. Increased investment would be followed by increased supply, a decrease in price, and the creation of economic incentives for consumers to switch from non-renewable to renewable energy sources. And it wouldn't just be the consumers who switch. At higher valuations it would be easier (4x easier) for renewable energy companies to outbid oil & gas companies for the best executives and engineering talent globally. Why? Larger share option packages. In the long run this could result in relatively more innovation and the formation of competitive advantages. Finally, if done at good ROI's the outcome for existing shareholders is positive even if any upfront dilution were perceived as negative which is often, but not always, the case.
The point is that investor opinions matter because:
- Investor opinions inform prices (price discovery),
- Prices influence the capital a business can raise, and
- Business operations have tangible impacts on the world.
So for as long as businesses have positive or negative impact the opinion of active investors (long and short) will matter. They matter a lot.
Unfortunately such externalities are usually ignored in academic circles because they are inconvenient. I liken it to the finance equivalent of a spherical cow. It's also why I like Bill Ackman's sage advice to aspiring investors: "go work for startup". Why? Because nobody understands the self-fulfilling nature of capital more than startup founders & employees 😉.
Interestingly, we saw this scenario play out last year with Tesla. Irrespective of your opinion of Tesla's business; their ability to execute not one, not two, but three capital raises through share issues in 2020 for a grand total of $12bn has afforded them a lot of optionality. Tesla has retail investors to thank for that $12bn. As does GameStop who just raised $1.1 billion.
But I digress. The point is that we recognize the importance of investor opinions at Nosible and we really want to see them scale. Our mission is to create technological force multipliers of investor skill.
There are many ways to do that, but we started with a crazy idea. What if we could provide every investor in the world their own completely personalized artificial intelligence? What would that future look like?
Well, if investors had their own personal AI to do the busy work - screening for ideas, downloading data & reports, finding peers for comparisons, comparing accounting metrics & factor exposures, creating rough valuation models, running simulations, and identifying themes & sentiments - then investors would have more time to do the things that AI can't - uncovering creative accounting, adjusting valuation models, evaluating the quality and integrity of the management team, talking to customers, visiting locations, and otherwise putting the scuttlebutt method into practice.
Given more time to do what they do best instead of wrangling data out of XBRL and into Excel we believe that active investors - including smaller, boutique funds - would discover great companies that deserve capital more often and uncover frauds like Wirecard, Nikola, and Steinhoff sooner. And, as our though experiment demonstrated, we could all be better off for it.
Nosible is not interested in replacing or subjugating active managers, we want to liberate them from drudgery. We are building Tony Stark's J.A.R.V.I.S ... just less cool and only for investors. That's our 10-year plan ... today I am just proud to announce that our phase 1 product - our global equity idea generation platform - is graduating out of beta testing 🎉.
If I were pressed to sum what Nosible is in one short paragraph I would say this - every investor has a unique style. A signature. A set of opinions learned from a lifetime of winners, losers, and neither here nor there-ers. At any point in time, the cumulative experience of an investor is reflected in their portfolio. Nosible learns your style and uses it to make your life easier. It find ideas that are worthy of your time, automatically benchmarks them against your portfolio and peers, and produces deep portfolio insights through visualizations that will inspire confidence in your clients.
Going forward, this blog will cover a variety of topics including analyses of well-known portfolios, write ups of companies we are adding to our portfolio, details regarding our AI, and various tools and techniques that are generally useful for active investors. If you would like to learn more about Nosible please feel free to visit our website and book a demo. If you're just here for the free content, that's awesome, please let us know what you're interested in reading in the comment section below and don't forget to subscribe for email notifications and follow us on Twitter.
Thank you for reading, I hope you have enjoyed this post.
CEO & Founder, Nosible