3 Way to Beat the Market
According to legendary investor, Bill Miller
Day 41 | $4,388
As investors, we live in an era of abundant information. From financial data to the wisdom passed down by legendary investors, we have incredible resources at our fingertips. But how do we use this wealth of knowledge to gain an edge?
Legendary investor Bill Miller shared his thoughts on this in a 2006 commentary, outlining three competitive advantages that can help us outperform the market:
Informational
Analytical
Behavioral
Let’s break these down and explore how they apply to us as everyday investors.
1. Informational Advantage
This is about knowing something material that others don’t—an edge that’s rare and difficult for ordinary investors to achieve. As Miller put it, “It is the easiest to exploit and the hardest to find.”
I experienced this once with LandBridge (LB), a stock I discovered while researching Texas Pacific Land (TPL). On a niche blog, I learned that Horizon Kinetics—a major TPL investor—was backing LandBridge’s IPO. I bought in at $20/share, and today it’s over $45—a 125% gain!
But let’s be honest: these opportunities are rare. By the time most of us hear about a stock on social media or in the news, insiders have already made their move.
Informational advantages are exciting but not something we can rely on consistently.
2. Analytical Advantage
This involves interpreting publicly available information differently than others. In Miller’s 2006 example, he believed Amazon’s margins would expand beyond what the market assumed at the time.
He was right—Amazon evolved into an eCommerce and cloud computing giant.
However, achieving an analytical edge requires deep financial expertise and bold conviction. It’s not just about following a hunch; it’s about understanding business fundamentals inside and out.
While this is something we can develop over time, it’s challenging for most of us to compete with professional analysts in this area.
3. Behavioral Advantage
This is where ordinary investors can shine. Behavioral advantage comes from understanding how emotions and biases affect decision-making—both ours and the market’s.
For example, pessimistic investors may avoid stable companies because they expect things to go wrong, while overly optimistic ones might take excessive risks on speculative stocks. Recognizing your own tendencies can help you make better decisions.
Miller himself leveraged his optimism to buy during market downturns when others were selling—a classic case of “being greedy when others are fearful.”
As he noted, “behavioral patterns are deeply ingrained in human psychology and unlikely to change anytime soon, making them a systematic opportunity for disciplined investors.”
Key Takeaway
While informational and analytical advantages are difficult for most of us to achieve, the behavioral edge is within reach.
By staying introspective and disciplined, we can capitalize on market inefficiencies caused by human behavior.
So ask yourself: What beliefs or behaviors influence your investing strategy?
Which ones give you an edge—and which might hold you back?
Until next time, keep walking!
Jeremy ✌️