Frontier Justice

#investors

When adding names to coverage, you must be fair to the process, the outcome, the management, the market and the stock. Here’s how.

---

Frontier: the limit of understanding or achievement

Adding a new name to coverage pushes a boundary. It gives us more to do and more to explore. By definition, moving beyond our current frontier means entering into some level of uncertainty. Even within the areas or sectors of coverage we follow that already do nearly identical things, company A has a different management than Company B. For a guy that spent 10 years covering Coke and Pepsi, this lesson took a surprisingly long time to really gel for me. The fact is, I didn’t do it justice initially. I made assumptions about two companies competing in one market. I thought the pricing was constant enough, the distribution similar enough, and the product ubiquitous enough, that there would be no substantive differences. But I didn’t account for human behavior, and it makes a difference that even AI modeling can’t always predict. People are hard to model. Moving out or stretching the frontier to add new names, even in common places, requires a level of rigor and consistency. You need to be sure that you are adding value as measured by identifying available alpha and sufficiently monetizing it.