What wouldn't you invest in?
To define the question a bit further, I want to place some constraints: legal, honest, financials written in a common language, and accounting under a common standard. I am thinking only of investments that are both permissible and analyzable. Within that universe of opportunities, what wouldn't you invest in, were a given security trading at a price that appears to meaningfully diverge from its value? I ask in order to get the lay of the land in terms of what "just isn't done". Bankrupt companies? Tobacco? Gaming? Firearms? Stocks under $5 per share? Leveraged companies? Late filings?
My answer: nothing. There is nothing that I would not buy for the right price (under the constraints enumerated above). The expected value of one's portfolio is a result of outcomes and sizing but it is also limited - voluntarily limited - by your mandate. As for me and mine, I want to maximize expectancy and therefore minimize the arbitrary limitations on our mandate. At the same time, we love counterparties with constrained mandates. What are your constraints? Stated another way: if you could invest in whatever you like, what would you dedicate your time, energy, and money towards? In practice, how does that diverge from what you spend your resources on today?
In polling friends at large money managers, the typical response is that they spend between 5-20% of their money under management on investments that they think are the best (had they no audience but their selves and no goal but +EV). The rest is for institutional reasons, typically career preservation and reputation management. The problem with investing is that many of the investments that are most institutionally defensible have virtues that are the most obvious and priced in.
Happily, I've been able to preserve an environment that is dictated by expectancy: first and foremost our downside, then our upside and probability of each potential outcome. The simple task of trying to make sense of the world is hard enough work. It is nearly impossible to do it while simultaneously trying to appease arbitrary irrelevant goals simultaneously. Trying to actually make sense can be so different than trying to look like you are making sense that the two will frequently end up on opposite sides of a trade. We will end up liquidity providers for counterparties who have to show that they are in the latest fad or out of the latest scare, because that is what they are paid to do. Some things just aren't done… and we love to do them for the right price.