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The Jigsaw Puzzle Of Investing


2023-06-16, Joe Jugovic

My wife loves to puzzle. It’s a beautiful thing. Birthdays, anniversaries, Christmas, I don’t have to think too hard; she gets a puzzle. Never a new puzzle though. I’ve discovered you can get a “slightly worn” puzzle at second-hand stores for at least 75% off making us both happy!

Over the years, I’ve come to think of investing as working on a jigsaw puzzle. When I first started in the business in the mid 1990’s, if I came across a new idea, I’d gather all the reports and data I could find and speak to as many “experts” as possible. Each data point was a piece of the puzzle, the more data, the more pieces, and the better the chances of getting things right… so I thought. The moment of nirvana was when all the pieces fit together perfectly, the investment picture was clear, and we’d invest and make wonderful future returns for clients.

Young Joe’s enthusiasm to uncover all the stones and gather as much data as possible was admirable. But what I came to discover quickly was it was also slightly delusional. It is not the volume of data and opinions (i.e., puzzle pieces) that led to successful outcomes, but rather the ability to interpret them correctly and in a timely manner. The analysts I would speak with built complicated company models that looked fit to launch spaceships into orbit. However, often they were just as prone to reaching incorrect conclusions as a layman.

After a few early investing battle scars, I reached the conclusion that investing success for me was not going to be based on perfectly positioning every jigsaw piece to see the picture and “outsmart” the market. In some ways it was the opposite. I knew I was just an “average Joe” as the saying goes. Outsmarting the market was not an option. It also hit me that the puzzles I needed to work on had to be easy – less 5,000-piece puzzles and more 64-piece puzzles, my sweet spot!


What has become incredibly clear to me is it was futile to try to position every piece of the investment puzzle before actually reaching a conclusion and acting on it. By the time “average Joe” found all the pieces and completed the picture, so did everyone else. The opportunity was wasted. The quote by Carveth Read which states, “It’s better to be approximately right than exactly wrong,” is precisely right!

While precision is desirable for any research project, it’s often unrealistic when dealing with a dynamic such as the economy and stock market. I’ve learned to appreciate the usefulness of reasonable approximations. If we can see the picture with only half the pieces and earlier than others, it often leads to success.

Learning to operate with a partially finished picture is challenging but often necessary. Some of our most profitable investing occurs when the puzzle has been sparsely populated. Ironically, some of our biggest mistakes have occurred when we thought the picture was very clear with many “facts”. To this day, when I hear the term “no-brainer” in reference to a possible investment, I get nauseous!


The current market condition is challenging. It feels like it’s a 5,000-piece advanced puzzle set. We know to be careful of these. If things don’t add up, we need to err on the side of caution.

Investors seem confident that the challenges associated with last year’s sell-off are in the rear-view mirror. Whatever economic contraction may take place, if at all, it will be minor and short lived; that inflation is moderating, and we should be on the cusp of interest rate cuts. Yet, the unemployment rate remains near multi-decade lows and wage pressure near multi-decade highs. In addition, while home prices stalled out briefly, they seem to have a bid back under them again.

Year-to-date the “stock market” has been strong. The S&P 500 is up over 13%. Like the economy though, it’s unbalanced. A handful of the largest growthy stocks which make up only 2% of all companies in the index have driven most of the returns. The remaining 98% of the companies have, on average, not taken part in much of the rally. Historically, this type of narrow market leadership has not proven to be sustainable nor a strong foundation for a multi-year bull market in stocks.

We work with less than perfect information and market anomalies all the time as investors. We understand this and that’s why one of our core tenets of portfolio construction is maintaining a margin of safety. It’s not “in case” we’re wrong about something but, to the degree, that we “will” inevitably be wrong. Deep discounts in valuation allow us to amplify that safety net and can assist us in being confident that we have the picture right without all the pieces in place.

One last point on incomplete puzzles. While the second-hand store has great sales on puzzles, from time to time they too are missing pieces. I’ve learned flowers pair nicely with puzzles just in case my wife can’t approximate the picture!

All views and projections are the expressed opinion of QV Investors Inc. and are subject to change without notice. This Update is provided for informational purposes only. QV Investors takes no legal responsibility from any losses resulting from investment decisions based on the content of this Update.


Joe Jugovic | Advising Partner

Joe fulfills an important mentorship role in the ongoing development of QV’s investment team.