Being in B School I get to hear from lots of successful investors, guest speakers, and current/former professionals teaching classes. There is a common refrain that gets repeated in different formats by lots of people. Its often talking disparagingly about sell-side analysts but also referring to other investors and buyside firms. The statement usually takes some form of, "We've been successful because we do the hard work. Lots of investors don't even [fill in the blank]." I've heard a number of different things like, only model the income statement and don't look at the balance sheet, don't bother reading the 10-k, don't think about Cap Ex and only look at EBITDA, etc.
A good example of this was in this week's Baron's talking the PM's at Lucerne Capital "His experience in valuing small and midsize takeover targets had given him a healthy skepticism for equity analysis. "People don't do a lot of in-depth work, particularly in Europe,""
My question is how much of this is just trying to explain success ex-post and how much of this is true? Ignoring algorithmic trading, are there really people out there doing long/short equities (or even sell-side research) that don't even crack the 10-k? And if so how are these people getting hired? Maybe the "dumb" funds just aren't hiring but everywhere I've had interviews the process is grueling and very detailed. I can't imagine pitching a stock and saying, yeah I didn't read the 10-K but the last investor day presentation looked good and the stock is cheap, let's buy!
It would be great if there really are that many dumb people out there because it means that many more opportunities to make money by being smart. I guess I'm just skeptical that it is really that easy and there really are that many lazy people out there.