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Find Value By Investing In Diversity

Jun. 07, 2020 8:02 PM ETMETA, ACN, NACP9 Comments
Raman Bhalla, CFA profile picture
Raman Bhalla, CFA


  • Add diversity to your investment questions along with valuations.
  • There is overwhelming evidence of an uneven playing field.
  • Diversity has been proven to be an outperforming indicator.

The investing world makes little sense today. Valuations seem increasingly disconnected from reality. To understand this point, look no further than Facebook (FB). On a day where news was released of an employee walkout and civil rights criticism of Mark Zuckerberg, the stock was up 3% on the day.

The market keeps rising even as unemployment is reaching historic levels due to the pandemic, China is exerting control over Hong Kong, and there are riots in the United States over social injustices. People are less willing to spend and businesses are less willing to invest.

When I vet an investment, I believe financial models are necessary to understand valuations and I spend a great deal of time creating them. I also believe they don't tell the full story. I prefer understanding the world we live in, the potential markets for products and services, and the overall story of a company. The best way to understand this approach is through questions.

Think about Game Theory for a second. I spend a lot of my time figuring out who owns what and what are the incentives for management, investors, and even governmental policies.

When I look at securities, I care who owns it. Why do they own it? Are they only invested in that part of the capital structure? For example, some investors will lose on some securities to gain on others in distressed situations. Can the investor exert power over decision making? Is this a big allocation of their portfolio? What are the incentives and compensation of company management? What's the public's opinion of the company and sector? Will the government be involved? The list of questions is endless.

And I've just added a new and powerful question. Is the company diverse?

This will make more sense later.

As investors, we need

This article was written by

Raman Bhalla, CFA profile picture
Wall Street professional that has experience in multiple asset classes, derivatives, deep fundamental analysis, hedge fund strategies, alternative data, factor investing, and building portfolios.Hedge Fund strategies include fundamental equity, credit opportunities, distressed debt, special situations, event driven, and sovereign debt.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

okeeffej profile picture
Can we stick to the market on SA?
Don't waste your time pitching diversity to readers of Seeking Alpha. You will be better off writing for The Huffington Post.
If you think several dozen upset Facebook employees — and biased political criticism — is enough to tank the stock price of a $50-billion corporation, then you should not be writing articles on Seeking Alpha, and you should not be investing in the stock market.
yardbird99 profile picture
If racism is as bad as you say it is, then racially diverse companies are being discriminated against on that basis and should be performing worse. If they are performing better, then it just shows that we're not as racist as you claim.
Ok, we aren't racist and diversity works. You win.
Buyandhold 2012 profile picture

Charlie Munger said: "Invest in a company that can be run by any idiot. Because some day an idiot will."
Invest in at&t then
P M D profile picture
I like the sentiment, but I'm not sure there's any company that is completely idiot-proof.
A T & T
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