Marks turned me onto this sort of thinking, and I have never, ever looked back. Great thought piece here!

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Great stuff Aaron. A few things that come to mind, wondering your thoughts on this.

1. Given the already difficult long feedback loop of investing, how much more difficult is a strategy like this to judge, where you can chalk things up as “it’s still in the underperforming stage”, as opposed to knowing you made a mistake in your analysis? Investing in a business that’s supposed to do well is quite easy to know when you’re wrong, if the business consistently is not doing well, safe to say you made a mistake. But with this strategy, underperforming is all par for the course.

2. Do you find there are many instances in which the fundamental degradation is even worse than what’s already priced in, thus eating into your MOS?

3. Does this extend to all types of underperformers, or just ones who are having “company specific” underperformance? For example, does this extend to businesses facing secular decline?

Thanks for sharing.

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