GUEST AUTHOR BLOG: by Chris Camillo, one of the world’s top performing self-directed investors and author of the new book "Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too."
Got any stock picks?
What do you think about “____” as an investment?
Got any stock picks?
Found your next big investment yet?
“I don’t know”, “I’ve got nothing”, and “still waiting” are the three responses I find myself giving most often to these questions from those seeking to replicate my investing success in the stock market. That is because over the course of any particular year I will at best find one, at most two (if it’s a really good year) investment opportunities worth pursuing.
I call myself an Information Arbitrage investor, meaning I buy a company’s stock upon discovery of an information imbalance, i.e., when I think I know something game-changing about that company that others don’t – and sell that stock when that game-changing information becomes widely accepted as fact by Wall Street.
The high concentration of city dwelling, middle-aged men who influence investment decisions on Wall Street create opportunities to profit from information imbalances that are most pronounced with respect to female, youth or rural oriented products, companies, and trends - so that is where I focus my energy. My type of investing places no value on fundamental or technical analysis. I don’t study balance sheets or PE ratios and you will never find me concerned about the quality of executive management at the companies I am invested in.
What I do requires zero financial literacy.
Sounds simple, right?
Truth is - the life of an information arbitrage investor is not all that different than that of a big wave surfer who sits through months of downtime, eyeing global weather and buoy reports while waiting for the next big swell to hit. Just as a the big wave surfer is at the mercy of nature and has to be prepared to travel to the ends of the world at a moment’s notice to seize the next big wave opportunity, the information arbitrage investor must be patient, ready and accepting of the timing and location of investment opportunities, and the manner in which they reveal themselves.
That is how I wound up standing in a line of several hundred women outside my local Target store at 8:00 AM this past September 13th. It was 256 days into the New Year and I had yet to find a new investment worth pursuing, but all that was about to change. Target was launching their much anticipated limited-edition apparel and housewares collection by Italian designer Missoni.
Many on Wall Street anticipated that the line would sell well in fashion forward cities like NY and LA but were unsure of how warmly the iconic designer’s signature zigzag design patterns would be embraced by Middle America.
It is in situations like this where the resourcefulness of an information arbitrage investor comes into play. If I were to believe the sentiment of my wife and female coworkers, or the online buzz that had been building for months among fashion and mommy bloggers then this day clearly had potential to go down as the most successful product launch in the company’s history.
"I call myself an Information Arbitrage investor, meaning I buy a company’s stock upon discovery of an information imbalance, i.e., when I think I know something game-changing about that company that others don’t – and sell that stock when that game-changing information becomes widely accepted as fact by Wall Street.""
Within 45 minutes of the store’s opening the fashion savvy bargain hunters had cleared out every Missoni item in the store– all 400 pieces of the collection - and a quick blog and Twitter feed check confirmed that the phenomenon I had witnessed was unfolding in towns big and small nationwide. I realized it would likely be hours, not days before the story hit the financial press, so from a lawn chair in the back of the store I pulled up my iPhone’s Scottrade app and initiated a leveraged options investment in Target’s stock . By later that afternoon and into the next morning every major media outlet from CNBC to the Today show was covering the story that would forever be known as Missoni Mayhem – and the ensuing lift in Target’s stock price provided me with a 24 hour gain of 100% on my investment.
Every real world observation you make as an information arbitrage investor is an at-bat. Each at-bat is a unique opportunity to discover an information imbalance that could lead to investing riches. But not all of your observations will qualify as genuine information arbitrage investing opportunities. Learning to become a great information arbitrage investor requires a change in the way you perceive the world around you—and the patience to wait on pins and needles for as long as it takes to put yourself in a position to capitalize on an information imbalance when it crosses your path.
In my new book "Laughing at Wall Street" I show how the average consumer with no previous financial education can outsmart Wall Street’s brightest by learning to identify game-changing information hidden in their everyday life while watching TV, reading tabloids, working at the office, shopping at the mall, eating out at restaurants, or driving the carpool to soccer practice. I am living proof that you don’t need large sums of money, fancy market data, or endless hours to achieve extraordinary wealth.
If you’re an average Jane or Joe you have an innate advantage over those on Wall Street—you just don’t know it yet.
About the author: "Laughing at Wall Street" author Chris Camillo is not a stockbroker, financial analysts, or hedge fund manager. And yet in early 2007, in the midst of the worst financial crisis since the Great Depression, he invested $20,000 in the stock market, and grew it to just over $2 million. How did he do it? By observing the world around him.