Focusing on already-liquid stocks is often superior to buying illiquid but "transparently cheap" names. The fight for an illiquid company to gain market attention and liquidity is a significant, often underestimated, risk that can negate the perceived valuation advantage.

During the Constellation Software sell-off, even bullish institutional investors sold their positions. The reason wasn't a change in fundamentals but rather pressure to follow short-term momentum and appease shareholders. This behavior, driven by career risk, creates opportunities for investors focused on long-term business value.

When a stock moves dramatically (e.g., +/- 40%) after news, both the fundamentals and your portfolio weighting have significantly changed. Passively holding the same number of shares is highly unlikely to be the optimal strategy. You must actively re-evaluate and decide whether to add, trim, or sell completely.

A specific arbitrage opportunity exists with serial acquirers. When they announce a deal that will significantly increase future earnings per share, the market often under-reacts. An investor can buy shares at a compressed forward multiple before the full impact of the acquisition is priced in.

The 2024 SaaS sell-off was driven by sell-side analysts setting unrealistically high growth forecasts for large incumbents. When companies inevitably decelerated, analysts lowered numbers, causing a sell-off. The cycle will reverse as companies beat these lowered expectations.

A company can beat earnings and still see its stock fall if its actions (e.g., high CapEx) contradict the prevailing market narrative (e.g., the AI bubble is popping). Price is driven by future expectations, not just present-day results.

Fears of AI disruption have caused an overreaction in the market, depressing the stock prices of stable SaaS companies like HubSpot. Trading at just 3x forward revenue despite strong fundamentals, these firms represent a value opportunity driven by uncertainty, not just fundamental risk.

When buying a quality company whose stock is falling due to bad news, Terry Smith often buys in three separate tranches. He did this with Fortinet as its growth slowed post-COVID. His rationale is that negative news and earnings warnings often 'come in threes,' and this staggered approach helps manage entry price risk.

Investors often misinterpret the impact of complex regulatory changes, causing price moves based on noise rather than substance. This creates arbitrage opportunities for firms that can accurately differentiate between consequential rules and those that ultimately don't matter.