Just to dive deeper into @CompoundingCap1 's point on informational edge. I think few realize how influential the investment pods (Citadel, Point 72, Balyasny, etc) are on the market. They are the highest commission payers on Wall Street by a long shot

Because they pay such high commissions, they get preferential treatment from sell-side for corporate access. That means they can get 5 meetings with a management for every 1 meeting some other asset manager will get.

Each analyst on a pod will typically only cover 1 or 2 sectors, and they are restricted to only covering 30-50 stocks each. That means a pod with 2 analysts and a PM are only covering a universe of ~100 stocks.

If they want to cover a new stock, they need to drop one from their existing list. This, combined with frequent management access, means they have massive informational edge over every other market participant.

Beyond that, they also can influence Wall Street at large. They often participate in Idea Dinners, where they present long/short ideas to a group of other influential managers at other firms.

This has a multiplier effect. If a pod says they are long or short StockXYZ at an Idea Dinner with 10 other analysts, those analysts are going to start doing diligence on that short, several of them may put on the same long or short, leading to crowding.

At the same time, that pod can call around to sell-siders (who will ALWAYS answer their calls and emails, because again they are the #1 commission payers). Through repeated interaction with sell-siders, they can subtly influence future research opinions.

Sell-side is a nexus of information dissemination. Sell-siders talk to everyone. So if a pod is long/short a particular stock, they'll let the sell-side know. Then when the mutualfunds/longonlys call, the sell-sider will say "hedge funds love/hate this stock for xyz reasons".

This further extends the pods reach and influence.

Most investors have NO IDEA how little information they know. They think that reading 10-k's/transcripts is enough to get an "edge". They are dead wrong. Who do you think knows more about $MSFT, a guy reading transcripts or a guy who has had 10 meetings with Nadella this year?

This is why i think investors should pick a good industry (high ROIC), and focus narrowly on developing their circle of competence there. If you like Semiconductors, just learn about the 30 Semi companies and don't stray outside that zone.

Yes you'll lack "diversification" but you'll actually learn enough about that industry over time to make accurate predictions. If you invest outside your circle of competence, size the position small to limit your risk.