The cost of doing what everyone else is doing
Consensus is comfortable and usually already reflected in the price. Comfort and return tend to sit at opposite ends of the same trade.
There is real comfort in owning what everybody owns. If it goes wrong, it went wrong for everyone. But comfort in markets is rarely free - by the time a view is genuinely consensus, it is usually reflected in the price, and what you are buying is the story rather than the opportunity.
Expectations are the thing being priced
A widely admired business can be an excellent company and a poor investment at the same time, because the price already assumes years of good news. The question is never simply 'is this a good business?' but 'is it better than what the price assumes?' Those are different questions and only the second determines the return.
Independent does not mean opposite
The answer is not to reflexively do the opposite of the crowd, which is just a different way of letting the crowd decide. It is to do the work yourself and act on your own conclusion - which will sometimes agree with consensus and sometimes not.
Got a question on what you have just read - on bottom-up research, quality investing, or the Category III AIF structure? Write directly to the office. These essays are general views only, not investment advice.
A research-led equity investor with over twenty years in the Indian markets. Designated Partner of Stonebridge Advisors LLP, Investment Manager of Anchor Rock Investment Fund - I, a SEBI-registered Category III AIF.