Most of the investment strategies that have been described have a common theme: the manager is seeking to profit by finding undervalued or overvalued securities. Where do they find them? Is it in widely followed large capitalization companies in the US? Not likely. It's hard to see mispriced stocks when there are twenty sell-side analysts ferreting out information on the same investment. It's better to go where there is little research coverage. In the US, Western Europe and Japan, this would be in micro, small and mid-sized companies. It may be an industry or company in the developing (such as China, India or Brazil) or frontier countries (such as Nigeria). A manager may decide to invest in esoteric securities such as Credit Default Swaps and OTC (Over the Counter) Derivatives.
Of course, there are exceptions: David Einhorn and his very public bet against Lehman in 2008. For those interested, his detailed analysis has been posted here (starting on page 4) by Whitney Tilson at seekingalpha.com. George Soros and the British Pound; Jim Chanos and Enron.
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