It's important to know the investor base of your investment (excluding you)

We are seeing a diversification in AI stocks, with execution now more important than merely concept, and volatility become higher. This article hopes to provide some color to tech investors and help them reduce risk and volatility of portfolio.

The most obvious difference is between Coherent and Lumentum. Coherent used to be favored by Asian investors in 2023, while Asian investors shift their preference to Lumentum in 2024 given their check on future market share shift in transceiver, but ignore the execution progress. Meanwhile, US investors are more willing to take longer term position. Hence we see Coherent up 20% while Lumentum down 20% within a few day. Knowing the investor composition behind each stock is much more important than many investors can imagined, especially for long-short investors.

Many portfolio managers in Asia want to invest in US and Japan. Question is are they ready to work around the clock and really understand local market and the investor type behind? The answer is no for many of them - though many thought they can, but they prefer to apply the old habits to these new markets, causing meaningful losses and time.

It is like doing business, it is important for portfolio managers to give authority to those with local expertise as well. After all, it is more important to build a profitable portfolio rather than merely a big portfolio.

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