Filtering Out the Wall Street Noise
Insights on disruptive street noise, the pitfalls of a quick-money mindset, and prioritizing quality over speculation
Over time, Quality Value Investing’s (QVI) Real-Time Stock Picks have outperformed the S&P 500 by filtering out the noise from Wall Street and avoiding high-risk, trendy stocks or trading schemes.
This QVI post addresses the financial services industry’s captive influence on retail investors and how to navigate the inherent bias toward achieving alpha.
Lessons on Reducing Street Noise
We have two classes of forecasters: Those who don’t know and those who don’t know they don’t know.1 — John Kenneth Galbraith (1908-2006), Canadian-American economist
Too many investors believe they can consistently predict trends, catalysts, and macro events.
Crystal balls, disguised in sophisticated methodologies, encapsulate forward revenues and earnings projections and specific future stock prices. Indeed, history reveals that such practices are a fool’s errand.
A tiny percentage of investors are wired with the emotional intelligence needed to consistently make winning short-term trades—such as achieving 60/40 win-loss rates or similar—more frequently than most market participants. These talented traders market their strategies to a public eager for quick profits. However, science has not yet figured out how to transfer the DNA code of successful traders to their clientele. On its own, this shortsighted strategy falls short of expectations or promises.
Despite a significant shortfall in brain wiring, we want it to work for the financial security of our families. Therefore, we continue seeking more quick money ideas, perhaps from a different source gifted with market-timing DNA, even though our misaligned intent persists.
In fairness, the purveyors are often well-intentioned market whiz kids trying to spread the gospel of what seems like easy money. Again and again, their followers revisit the dry well despite lacking the harness necessary to time the market — reassured by the hope that another group of fast-money wannabes will join them at the next market fad rollout party.
The nineteenth-century circus impresario, P. T. Barnum, uncovered this unrelenting human fallacy over 150 years ago. Paraphrased by captivated media from his notorious carnival barking, Barnum suggested that there’s a sucker born every minute.
Barnum’s legendary reference to poor judgment remains relevant years later, and the stock market is no exception. The good news is that this irrational behavior across the market creates temporary profitable buying opportunities, offering the potential to outperform the market in the long run.
Quality-driven value investors commit valuable time to their portfolios instead of languishing by following the pundits.
Leave the daily noise and prognostications to the captivated followers of the small group of DNA-blessed market experts and technicians. Each keeps readers, viewers, or listeners entertained as portfolios implode from inadequate allocations influenced by the daily trading nonsense filling the Wall Street vacuum. Take heed of the talking heads—including me as a Finstack2 newsletter writer—for the sake and safety of your portfolio.
This post isn’t about current market conditions or what I was buying, selling, holding, shorting, or exploiting to outsmart the market in the short term—I’ll leave that chatterbox to the financial entertainers. Instead, it’s about tuning out the noise from Wall Street and keeping investing straightforward by leveraging the time-tested winning strategy of buying shares in high-quality companies when they’re trading at value prices and holding each for the long term as proud shareholders.
The Rapid Wealth Framework
Investors typically pursue short-term surges of growth-oriented capital gains and high-yield dividend income.
The crowd seeks instant gratification from the implied promises of promoted trading platforms, which, based on historical results, tend to underperform the market. This incongruity reminds us that on Wall Street, the crowd is nearly always wrong or, at best, average across market cycles.
Fueled by Ivy League degrees and advanced software, Wall Street spreads intricate and presumptive financial models that include precise earnings estimates and stock price targets every market day. Unfortunately, many of these projections are as intuitive as a Magic 8-Ball, or the financial services elite earns wealth more from portfolio performance than fees and bonuses.
As expected, herd investors will ask, “What exact price will the stock be trading at by the end of this week, next year, and in 2030?”
My answer: I don’t know. However, I do know that investing in common stocks to harness the power of compounding, backed by a wide margin of safety, offers an ideal scenario for lifelong portfolio success, unlike relying on a single bull market. Nevertheless, deep-dive research is often overrated. Suppose it were superior at forecasting future stock prices. Why aren’t all investors getting rich by following the stock picks of fund managers and the price targets set by sell-side or buy-side analysts, most championing the deep-dive, predictive analysis approach to achieving total return?
Predicting market directions reliably within specific dates and time frames is impossible. Just ask the short sellers who held onto their shorts during the epic bull market decade from 2010 to 2019.
Successful forecasts of a specific market downturn often arise randomly from a few fortunate predictions made by pundits, elevated by Wall Street media and guru-of-the-month trading clubs. However, corrections happen at unpredictable times, meaning anyone forecasting an open-ended market drop or rise is eventually correct.
Aim for a total-return perspective with a gradual and patient long-term approach, in contrast to the get-rich-quick attitude of day traders, trend followers, and momentum investors.
Kicking the Tires: A Hit or a Miss?
The more profitable strategy for retail investing prioritizes factual data over speculation.
In my former career as an executive, I hosted hedge and mutual fund managers and sell-side analysts at a publicly traded company. I valued the experience and held deep respect for the visitors. Some of these professional investors have now attained celebrity status in financial media.
Still, I pondered the value our guests had derived from examining the details while my employer nurtured everything discussed during the visits. Maybe the outing was an instinctual experience for the fund managers and analysts.
The resulting investments or predictions regarding the company’s stock were frequently inaccurate. This enlightening experience taught me to ignore Wall Street quantitative analysts, traders, and high-profile money managers who mainly focus on complex activities to drive fees from short-term gains for their clients and followers.
Wall Street thrives on its quarterly earnings releases and the excitement surrounding each report. However, predicting future stock prices, market trends, revenue growth, or earnings per share with consistent accuracy is more often unattainable even among senior company management.
Quality Value Investing does not attempt to predict in detail what will happen with the stock market, any particular business, or share prices. Instead, QVI screens, researches, and monitors quality businesses for current wealth and their stock prices for present value.
QVI aims to inspire subscribers to embark on a similar journey toward investing nirvana. The lessons promote near-term study and learning while advocating long-term savings and investing. Quality Value Investing’s posts emphasize owning shares of superior businesses rather than trading speculative instruments.
To develop a more profitable retail investing strategy, we must have the courage and conviction to filter out the noise of Wall Street, reject the fast-money mindset, and prioritize current wealth and present value over speculation.
As an accompaniment to the principles, strategies, and practices discussed throughout the Quality Value Investing newsletter, new readers and free subscribers are encouraged to access the QVI Real-Time Stock Picks by upgrading to a high-value, low-cost premium subscription.
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About the Writer
David J. Waldron is the contributing editor of Quality Value Investing, and author of the international-selling book Build Wealth with Common Stocks: Market-Beating Strategies for the Individual Investor. David’s mission is to inspire the achievement of his readers’ financial goals and dreams. His work has been featured on Substack Finance, Seeking Alpha, MSN Money, TalkMarkets, ValueWalk, Yahoo Finance, QAV—Australia’s #1 Value Investing Podcast, Money Life with Chuck Jaffe, LifeBlood with George Grombacher, The Acquirer’s Multiple, Capital Employed, Amazon, Barnes & Noble, Apple Books, the BookLife Prize, and Publisher’s Weekly. David previously enjoyed a 25-year career as a postsecondary education executive. He received a Bachelor of Science in Business Studies as a Garden State Scholar at Stockton University and completed The Practice of Management Program at Brown University.
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Disclosure: As of this writing, our total return family portfolio has long and beneficial positions in the common shares of all nine stocks in the QVI Concentrated Portfolio. I wrote this post myself, expressing my opinions. I am not receiving compensation for it (other than through Substack paid subscriptions.
Additional disclosure: Quality Value Investing (QVI) is an investment research newsletter for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond the QVI Real-Time Stock Picks, which are presented solely for educational purposes. David J. Waldron is an individual investor and author, not an investment advisor. Subscribers should always engage in their independent research or due diligence and consider consulting a fee-only certified financial planner, a licensed discount broker/dealer, a flat-fee registered investment advisor, a certified public accountant, or a specialized attorney before making any investment, income tax, or estate planning decisions.
Disclaimer: Although Quality Value Investing takes a skeptical view of the financial services industry, commonly known in the media as Wall Street—a euphemism for professional or institutional investing globally—it does not imply nor express specific issues or negative references regarding any actual organizations or individuals working within the financial services sector. Any perceived connection or offense to actual firms or individuals is coincidental and unintentional. In its general critique of the universal Wall Street business model, QVI avoids unproven conspiracy theories and offers a platform for commentary, critique, education, and parody. In this context, facts stand apart from any alternative perspectives. Therefore, the subjective thoughts shared by the author throughout the post are his opinions and should not be considered facts.
Tom Herman, “Weekend Report—‘How to Profit from Economists’ Forecasts,’” The Wall Street Journal, January 22, 1993, C1.
Kristopher Rymer of Safe Harbor Stocks on Substack coined the term “Finstack,” influenced by the original Twitter term, “Fintwit.”