Weekly# 29: How to Connect the Dots in Stock Investing — And Why 2 Portfolio Picks Just Popped 20%
This week’s 20% gainers include KINS — but the real edge comes from building your mosaic. Here’s how to sharpen your investing instincts and beat the tide.
Hello fellow Sharks,
First of all, Happy Mother’s Day to all the moms out there!
It’s fascinating how quickly the tide has turned—Mr. Market certainly has a short-term memory. In just over a month, we've swung from EXTREME FEAR (3) to GREED (62).
This shift is also clearly reflected in stock performance during earnings results. Last month, stocks trended downward regardless of how good the results were. But now, as we'll explore later in this Weekly, the market is reverting to its pre-Trump tariff drama dynamics, rewarding strong earnings with 20% stock price pops.
Since our last earnings update, 13 companies in the portfolio have reported: three missed revenue estimates, but only one missed EPS consensus estimates.
Our portfolio has reached an inflection point—once again outperforming the S&P 500.
Let’s dive into this Weekly!
Table of Contents:
Thought of the Week — Connecting the Dots in Stock Investing: Sharpening Your Mosaic Thinking
Kingstone Pops After Earnings Beat — +20% Since the Deep Dive
Powell Industries Dips 8% Despite Earnings Beat — Slower Growth Ahead
Thought of the Week — Connecting the Dots in Stock Investing: Sharpening Your Mosaic Thinking
The Books We Read, The Trips We Take
I’ve been thinking a lot lately about how what we read—and when we read it—shapes the way we understand the world. It’s not just the content of a book that matters, but the order in which we absorb ideas, and the context we’re living through while doing so. Read Book A before Book B, and your interpretation of Book B is forever altered. Reverse the order, and the takeaway might change completely.
For example, my wife and I were in Istanbul for our babymoon and noticed something remarkable—people deeply respected street animals. Cats lounged on store counters, dogs napped inside shops, and no one batted an eye. It felt baked into the culture. Recently, I started reading A Peace to End All Peace and came across a brief mention that, in 1912, Turkish authorities sent all the stray dogs to an island to die without food or water as part of a modernization campaign. It was a short and largely uneventful line in the book, but because of our trip, that sentence lit up in my mind. It clicked. It wasn’t confirmation, but it was a connection.
That’s the power of connecting the dots. Either the book or the trip on its own wouldn’t have led to that belief. But together, they offered a pattern. That same type of thinking—what’s known in finance as mosaic theory—is critical to becoming a successful investor.
The Investor’s Mosaic: Seeing the Bigger Picture
Picture a classic “connect-the-dots” puzzle from childhood.
You start off with a scatter of numbered points. At first glance, they look like a random mess. But once you start drawing lines from 1 to 2 to 3 and so on, a recognizable image emerges.
Investing is similar, except the numbers aren’t handily labelled for you. We’re dealing with incomplete, sometimes misleading pieces of information—economic data, news headlines, balance sheet figures, competitive intel—and it’s on us to draw the lines and see what picture forms. As Michael Steinhardt put it,
Investing invariably requires making judgments with incomplete or often inaccurate data.
And yet, some investors consistently solve this puzzle better than others. They’ve learned to integrate clues from different domains into a kind of three-dimensional view of an investment. They’re the dot-connectors, the mosaic builders.
Howard Marks calls this second-level thinking. In The Most Important Thing, Marks argues that to beat the market, you have to go beyond the obvious and assemble insights others miss.
Remember, your goal in investing isn’t to earn average returns; you want to do better than average… You must think of something they haven’t thought of, see things they miss or bring insight they don’t possess… Your thinking has to be different.
In essence, he’s saying connect the dots that others overlook and you’ll gain an edge. It’s a warm reassurance that being a bit of a puzzle geek in finance is actually a superpower.
This idea isn’t new. Back in 1934, Benjamin Graham and David Dodd (yes, the Security Analysis guys) laid the groundwork for mosaic-style investing. They emphasized gathering a wide range of information about a company, from financial statements to industry trends to management quality, and piecing it all together for a comprehensive picture. That comprehensive approach is basically Mosaic Theory 101. Instead of obsessing over one data source, Graham & Dodd taught investors to cross-verify and contextualize. A single financial ratio means little in isolation; its significance emerges when you view it alongside macroeconomic conditions, competitor metrics, and historical averages. Security Analysis was essentially a manual in dot-connecting for value investors, long before “mosaic theory” became a buzzword in the analyst community.
Then there’s Philip Fisher, who took dot-connecting to the next level with his scuttlebutt method. In Common Stocks and Uncommon Profits, Fisher encourages investors to talk to everyone who might know something about the company — customers, suppliers, former employees, even the janitor if he’s chatty. Why? Because each person shares a different dot of information, and when you connect them, you see the whole mosaic of the business. Fisher suggests using the “business grapevine” to actively gather these insights. It’s amazing how a casual conversation with a customer can reveal, say, a product quality issue that’s not obvious in the quarterly earnings report. Fisher understood that the context around the numbers is often as important as the numbers themselves. In other words, connect the qualitative dots to inform the quantitative dots.
Modern experts echo the same theme. Take Michael Mauboussin, he constantly blends knowledge from multiple disciplines — psychology, biology, economics, you name it — to enrich his investing perspective. His book More Than You Know is basically an ode to interdisciplinary dot-connecting. He’ll draw lessons from evolutionary biology to explain market behavior or use base rates from sports to inform probabilistic forecasts for stocks. It’s brain candy for the intellectually curious investor. The takeaway is clear: the more dots you can draw from (across economics, history, psychology, etc.), the more robust and original your investment mosaic will be.
In fact, research backs this up. Novel investment ideas often emerge not from discovering one new shiny piece of data, but from freshly recombining existing ideas. As the CFA Institute’s Enterprising Investor notes,
great ideas often develop by connecting existing ideas and techniques from different fields rather than genuinely new insights.
Keep an open mind and a broad information diet, and you’ll start to see links others don’t. Maybe a principle from biology helps you understand competitive moats, or a concept from engineering helps you evaluate an oil refinery company. The world’s knowledge is literally at our fingertips in 2025; the investors who beat the tide 😉 of mediocrity are those who make imaginative connections within that sea of information.
I love this stuff. My deep dives often weave together threads from macroeconomics, company specifics, and everything in between. Why? Because that’s how real-world stock investing works. If you only focus on one strand (say, just the financial statements), you might miss the larger pattern. The mosaic approach helps us navigate choppy market waters by seeing the undercurrents that others gloss over. It’s no coincidence that many readers consider Beating the Tide the best investment newsletter for getting these kinds of synthesized insights (I’m blushing, but it’s true!). I don’t just toss stock tips at you; I connect the dots so you see the full picture. And I encourage you to practice the same holistic thinking in your own investing.
So, how can you get better at connecting the dots? Let’s get practical. Below, I’ve split some tips into two groups: one for those just starting to develop this skill, and one for the seasoned pros looking to refine an already sharp toolkit.
Developing Your Dot-Connecting Skills (Beginner-Friendly)
If you’re newer to deep-dive investing analysis, don’t worry — mosaic thinking is a skill anyone can cultivate. Start small and stay consistent.
Tip #1: Keep an Investing Journal
Jot down your observations, ideas, and hunches regularly. This doesn’t need to be War and Peace; a few bullet points after reading an article or watching a market event will do. Over time, you’ll build a treasure trove of notes that you can revisit. Patterns will start to emerge in your own thinking. Keeping a journal helps you spot your personal dot connections and refine them. It’s like creating a breadcrumb trail for your thought process. Plus, reviewing old entries is often a humbling exercise that sharpens future decision-making.
I dedicate a full chapter in my book, The Most Boring Stock Investment Book You’ll Ever Read, on journaling or maintaining the story of your investments.
Tip #2: Tag and Link Your Notes
Borrow a trick from the productivity nerds: whenever you take notes on a company or an investing concept, tag key themes or categories. For example, if you write about electric vehicle stocks, tag terms like battery tech, energy prices, supply chain, etc. If you scribble an insight about consumer behavior from your trip to the mall, tag it retail trends or consumer psychology. Over time, these tags become linkages. Many note-taking apps (Evernote, Microsoft Notes, Notion, even a good old spreadsheet) let you search or group notes by tags. Personally, I evolved from spreadsheets to Evernote to Notion. Notion is a game changer for stock research.
Suddenly, that article you read on shipping logistics six months ago pops up when you’re researching a toy company now (aha, supply chain strikes again!). By deliberately linking notes, you’re training your brain to recall related dots when a new dot appears. It’s a simple habit that builds a “second brain” for your investing ideas.
Tip #3: Ask “What’s the Context?” Religiously
Make it a reflex to consider context whenever you encounter a new piece of information. If a company’s earnings per share jumped 20%, ask why: Was there a one-time asset sale boosting it? Is this happening across the industry or just this firm? If a stock’s price is down, what’s the broader market doing? Is a macro factor (interest rates, oil prices, etc.) at play?
By always situating the detail in a bigger picture, you force yourself to look for connecting dots. Over time, this becomes second nature. You’ll find that no data point lives on an island. Everything in the market is connected to something else. Curiosity is your best friend here — follow it.
A small example: you read that “commodity prices are rising”. Instead of saying “so what,” you probe: Could that affect the costs of the tech hardware stocks I own? Could it be inflationary? Which industries benefit from pricier commodities? One little headline can lead you to consider multiple investment angles when you chase down its context.
Tip #4: Diversify Your Inputs (within reason)
As a beginner, it’s easy to get overwhelmed with information (remember, everyone has a smartphone full of data these days). The key is to sample broadly but not indiscriminately. Read a finance news site, but also occasionally read a tech blog or a science journal or a bit of history. The goal is to feed your brain different flavors. You never know when a quote from a historian or a tidbit from a psychology study will illuminate an investing idea. Don’t worry if some of it seems unrelated; your subconscious is brewing a richer stew of ideas. It’s okay to have unresolved questions or tidbits floating around — those are dots waiting to connect down the road.
Tip #5: Separate Signal from Noise
Financial media and investment newsletters often hedge their statements or recycle similar narratives, creating an echo chamber that can distract rather than inform. Notice how most outlets attribute market moves to the same news, oversimplifying complex dynamics into catchy headlines. Effective dot-connecting means recognizing genuine insights amid short-term noise. In Beating the Tide, I deliberately minimize noise, focusing instead on information that provides clear signals about what truly matters for long-term investing success. This approach is precisely why I limit the newsletter to once a week and only send deep dives and trade alerts as they occur; I don’t want to distract you or overwhelm you with non-value-added news. Sometimes, less is more.
The common theme in these five tips is active engagement. Connecting dots is an active sport, not a passive one. By writing, tagging, questioning, and exploring beyond your comfort zone, you’re essentially training your mind to weave threads between information. Think of it as laying down mental highways between different regions of knowledge. The more you travel those roads, the faster and more intuitively your brain will link point A to point B to point Q when the time comes.
Advanced Dot-Connecting Practices (For the Pros)
If you’re a professional investor, you’re likely already doing a lot of the above. So let’s kick it up a notch. How can you refine your mosaic-building and ensure you’re leveraging your experience to the fullest?
Idea #1: Build Cross-Industry Models
Don’t limit your analysis to neat sector silos. Create frameworks or models that span multiple industries. For example, you might build a comparative model tracking customer acquisition cost across SaaS, fintech, and traditional banks. Or a model of unit economics from ride-sharing to food delivery to e-commerce. By doing this, you not only spot which companies are truly exceptional (or lagging) in a certain metric, but you may also catch trends transferring from one industry to another.
Many innovations or problems in business are not unique — they rhyme across sectors. A supply glut in semiconductors might foretell inventory issues in consumer electronics. A boom in one commodity might predict cost changes in consumer goods. Having a cross-industry lens helps connect these dots quantitatively. Plus, it trains you to think in first principles: stripping a business down to components that are comparable across apples and oranges. It’s a surefire way to surface non-obvious insights that single-industry specialists might miss.
Idea #2: Maintain Thematic Research Folders
Over time, you’ll notice certain big themes keep popping up. It could be AI disruption, aging demographics, climate change impacts, geopolitical shifts, you name it. Create dedicated research folders (or Notion pages as I do) for each major theme that interests you. Whenever you come across an article, chart, or datapoint related to that theme, drop it in the folder with a quick note.
These thematic dossiers become idea incubators. When a new stock or opportunity comes along, you can draw from these pre-built wells of knowledge. Considering an investment in a renewable energy company? Your “climate and energy” folder might contain three years’ worth of dots that you can quickly connect to evaluate the opportunity in context. It’s like having a scrapbook of clues that you can dump onto the table and assemble into a thesis. Professional investors often have these collections informally; making it a formal habit ensures no insight gets lost in the shuffle. It’s incredibly satisfying to pull out a ten-page thematic brief you wrote to yourself over the years, when everyone else is scrambling to understand a sudden trend.
Idea #3: Leverage Tools for a “Second Brain”
At a professional level, the volume of information can be tsunami-like. Thankfully, we have technology to serve as our trusty surfboard. Tools like Notion are fantastic for creating a structured web of knowledge. (Apologies that I keep bringing up Notion, but it has been a game changer for me, not just for research but to keep all my businesses and projects in one place)
Consider setting up your own mini Wikipedia of investing insights (That’s actually how my book came to be—it started as a bunch of investing notes I’d kept over the years, and one day I just hit publish. The content was already there). Record your research notes on companies, and link those notes to broader topics (just like you did with tags as a beginner, but now on steroids).
Patterns often leap out from these connections. Notion can be used to create dashboards that pull in data and news feeds alongside your notes, so your curated info and the live info sit together (dot, meet dot). The key at the pro level is to create a system that surfaces connections automatically. You’re essentially externalizing part of your brain into these tools, freeing up mental bandwidth. This structured dot-connecting approach ensures you won’t overlook a link just because you forgot about something — your “second brain” will jog your memory at the right time.
Idea #4: Conduct Post-Mortems and Pre-Mortems
This one is more of a technique than a tool, but it’s powerful for connecting dots in decision-making. For any investment you make, do a pre-mortem analysis — imagine it’s a year or two in the future and the investment went horribly wrong, then list all possible reasons that could have happened. This forces you to connect dots ahead of time (e.g., “Company XYZ failed because I overlooked how a new technology made its product obsolete, or I underestimated regulatory risks in their industry”).
By visualizing these scenarios, you often realize there were dots you hadn’t connected in your initial analysis. Likewise, after an investment plays out, do a post-mortem (win or lose) to dissect which connections you got right or wrong. Maybe you correctly anticipated a macro trend but missed an industry-specific factor. Learning from these will hone your mosaic thinking. Here is a post-mortem example.
Professionals improve not just by gathering more dots, but by improving the accuracy of the lines they draw. Continuous feedback is how you calibrate your dot-connecting compass.
At the professional level, dot-connecting becomes somewhat of an art form. You’re curating not just information, but the way information interacts. It’s about synthesizing efficiently without losing depth. Remember, the goal is insight, not info overload. The best investors are like skilled chefs — they taste ingredients (data) constantly, but when it’s time to cook, they know exactly which flavors to combine for the perfect dish. And they’re willing to experiment at the margins to discover new recipes. Treat your mosaic as something dynamic that evolves with each new piece of knowledge.
Bringing It All Together
If there’s one common thread (or should I say, one connecting line) in this week’s thought, it’s that no single piece of information is as valuable on its own as it is in the right combination. The real magic in stock investing happens when you fuse things together: when a chart you saw last month, a paragraph from a book you read last year, and a conversation you had yesterday suddenly link up to illuminate a path forward. That “Aha!” moment when the dots connect is pure investor bliss — and often, it’s where profit lives.
So as you continue on your investing journey, cultivate this habit of looking for interlocking pieces. Be a little witty and creative in your analysis: let your mind play with ideas from outside the immediate financial world, and bring them into your stock research. The mosaic you assemble will be uniquely yours and give you a perspective that stands out from the crowd.
Let me do the dot-connecting—$130/year for clarity in the chaos.
Portfolio Update
Portfolios continued the path to recovery. Portfolio USA’s performance improved more than the S&P 500’s, and now we are outperforming the S&P 500 by 100 bps YTD. Portfolio Canada’s performance improved less than the TSX’s, widening the performance gap from -226 bps to -263 bps YTD.
Tech, industrials and education led the recovery of Portfolio USA. Tech, gold and industrials led the recovery in Portfolio Canada. Healthcare was a negative contributor to both portfolios.
Contribution by Sector - Portfolio USA
Contribution by Sector - Portfolio Canada
Here’s the weekly stock performance for each portfolio: Weekly Stock Performance Tracker
Kingstone Pops After Earnings Beat — +20% Since the Deep Dive
It's been just 10 days since I published my deep dive on Kingstone Companies ( KINS 0.00%↑) on April 29, and already the thesis is playing out even faster than I expected. Following a stellar earnings release yesterday, the stock jumped over to $22 and settled at $21.67 at the close—a swift 20% upside from $18 when I published the deep dive and a massive 113% gain since I alerted paid subscribers at $10.
Earnings Summary: Crushing Estimates
Kingstone reported outstanding results, achieving its sixth consecutive profitable quarter. Here's what stood out:
EPS of $0.27: More than double the consensus estimate of $0.12.
Net income surged 172% y/y to $3.9 million.
Direct written premium growth reached 23% in core business, driven by favorable competitive conditions in downstate New York.
The combined ratio was solid at 93.7%, close to last year's 93.3%, even after accounting for a few larger-than-normal fire claims.
Earnings Call Highlights: Management Continues to Impress
CEO Meryl Golden was clear and confident, highlighting key points driving the quarter's strong performance:
AmGUARD Transaction:
Kingstone secured renewal rights from AmGUARD, a Berkshire Hathaway subsidiary. This deal, approved by regulators, is expected to add $25-$35 million in premiums annually, kicking in by late Q3.
Management emphasized rigorous upfront underwriting and believes these policies, written through Kingstone's high-quality "Select" product, will significantly enhance profitability.
Growth Momentum in Core Markets:
Kingstone's "Select" homeowners’ product continues outperforming legacy policies, with claim frequency decreasing for 13 straight quarters.
Select now represents nearly half of the policies in force and is expected to grow to 60% by year-end, reinforcing continued profitability improvements.
Financial Strength and Flexibility:
Kingstone completed the sale of its headquarters, realizing a $1.5 million after-tax gain.
Fully paying off its remaining debt will save over $800,000 annually, significantly strengthening the balance sheet and providing ample liquidity to support growth.
Investment Income Boost:
Net investment income jumped 36%, driven by strong cash generation and higher-yielding investments. With $44 million in lower-yielding securities maturing by 2026, management expects this figure to rise further.
Key Q&A from the Earnings Call
Fire Losses: An uptick in fire losses was a notable but random event, primarily affecting older legacy policies. Management sees no systemic issue here and confirmed no change in guidance, given offsetting lower catastrophe losses.
Capital Allocation: Kingstone’s board is actively discussing dividend restoration but is unlikely to pursue share buybacks soon, given robust growth opportunities.
Expansion Plans: While remaining focused on New York in 2025, management hinted at cautious geographic expansion for 2026 and beyond, emphasizing learned lessons from past missteps.
CFO Search: Kingstone is actively interviewing CFO candidates, reinforcing leadership strength soon.
Outlook and Strategy: Staying Invested
While shares are now close to my initial target price from the deep dive, I'm not trimming yet. Management continues to execute impressively, and the risk-reward profile remains attractive. The AmGUARD deal alone, combined with disciplined underwriting and operational efficiency, suggests further upside is likely.
I’ll keep a close watch on performance metrics and management’s moves. For now, KINS remains firmly in the portfolio—management’s execution gives confidence that the story still has room to run.
Latest Deep Dive Stock Jumped 19.6% Post-Earnings
On April 24, I sent a trade alert about this under-the-radar CX outsourcing gem to paid subscribers, and the shares are already 26% higher. Those who subscribed when I dropped the deep dive on May 7 are up 19.7%. This single trade likely covered their annual subscription—and then some (congrats 🎉). Even after this pop, I still see at least another 120% upside, so it's staying firmly in the portfolio.
Earnings Snapshot
This quarter was impressive. The company delivered record quarterly revenue, driven by a resurgence in demand for its advanced CX solutions. EPS beat expectations by 14%, underscoring how their margin expansion strategy (remember the shift from onshore to higher-margin offshore and AI-driven CX?) is paying off big-time.
Key Earnings Call Highlights
Revenue Growth: Management emphasized a return to double-digit growth, fueled by new client wins and deeper wallet penetration in strategic verticals like healthtech and e-commerce.
Margin Expansion: Margins continued expanding thanks to higher offshore utilization, efficient cost controls, and AI-enhanced CX solutions.
Guidance: They've raised full-year guidance, indicating sustained confidence that their growth and margin trends will continue.
Outlook Remains Strong
Management remains optimistic, expecting robust demand to persist, especially in their offshore and nearshore operations. They highlighted a solid pipeline of new business and anticipate further expansion in key verticals, which should continue driving profitability.
Analyst Q&A Summary
During the earnings call, management reinforced their confidence in ongoing margin expansion, highlighting continued offshore shifts, higher utilization, and incremental AI-driven revenue as key drivers.
When asked about client concentration, management noted their active efforts to diversify the client base and expressed minimal concern due to high client retention rates and ongoing success with their "land and expand" strategy.
Addressing macroeconomic conditions, management indicated stable demand despite market volatility, particularly noting resilience in tech and retail sectors.
Bottom line—strong execution continues, and this CX specialist is firing on all cylinders.
We're sitting pretty with solid gains, but the runway ahead remains very compelling. Expect further updates as this investment unfolds.
Powell Industries Dips 8% Despite Earnings Beat — Slower Growth Ahead
It's been a strong quarter for Powell Industries ( POWL 0.00%↑ ), yet the stock reacted negatively, shedding about 8% post-earnings due to investor concerns around slowing order growth. Since our initial position, Powell has delivered strong returns, but recent results suggest caution moving forward.
Strong Earnings Results, But Growth Concerns Loom
POWL reported solid second-quarter fiscal 2025 results, highlighted by impressive profitability:
EPS of $3.81: Beat consensus estimates by $0.37.
Net income surged 38% y/y to $46.3 million.
Gross profits jumped 33% to $83.4 million, achieving a robust margin of 29.9%, driven by disciplined project execution, strong operating efficiency, and beneficial project closeouts.
Revenue rose 9% y/y to $278.6 million, slightly missing expectations by about $4 million.
Despite these robust numbers, the revenue miss and stagnation in backlog signalled future growth deceleration, worrying investors reflected in the 8% share price drop.
Executing Well But Facing Headwinds
CEO Brett Cope remained upbeat on Powell’s operational strength, yet was realistic about emerging challenges:
Order Growth Slowing:
New orders reached $249 million, marking a slight y/y increase but down sequentially from previous quarters.
Backlog remains flat at $1.3 billion, providing revenue visibility but suggesting potential growth limitations ahead.
Sector Performance Mixed:
Electric Utility and Commercial/Industrial sectors showed strong performance, increasing by 48% and 16%, respectively.
Conversely, Petrochemical revenues dropped 13%, indicating softness in this market.
Strategic Investments:
Powell recently expanded its Houston facility, targeting incremental revenues of $20-$40 million starting fiscal 2026.
New product launches and R&D investments aim to further penetrate sectors such as Electric Utilities and Data Centers, providing future growth avenues.
Margin Outlook:
CFO Mike Metcalf noted that current elevated gross margins were boosted significantly by project closeouts, contributing around 275 basis points. Normalized margins are anticipated to stabilize around 26%-27% moving forward.
Key Q&A from the Earnings Call
LNG Market Concerns: Analysts queried the sustainability of LNG-related projects, given tariffs and regulatory risks. Management confirmed continued strong demand but acknowledged potential impacts from macroeconomic uncertainties.
Capacity Expansion: Questions arose regarding expected contributions from the Houston facility expansion, with management clarifying modest impacts for 2025 but more substantial incremental revenues by 2026.
Capital Deployment: Powell’s sizable cash balance raised investor interest about potential stock buybacks or M&A. Management signalled a preference for further organic growth and targeted strategic acquisitions.
Outlook and Strategy: Cautious Hold
Powell Industries remains fundamentally strong, evidenced by its operational execution and strategic investments. However, the slowing order growth and flattening backlog slightly reduce its risk-reward profile. The recent developments make it a candidate for trimming or divestment, as I include new opportunities in the portfolio.
I’ll closely monitor Powell’s execution. For now, the position remains stable but warrants heightened vigilance moving forward.
That’s it for this week.
Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!
Further Sunday reading to help your investment process: