They Lose on Purpose — And Still Come Out Ahead | The Weekly Wrap - 5/31/2026

This week’s Excess Returns Weekly Wrap breaks down the best investing insights from Adam Parker, Robert Hagstrom, and Eric Crittenden. We discuss why the market may still be trading on fundamentals, why valuation alone can fail as a stock-picking tool, how modern portfolio theory changed investing, what business-driven investors can learn from Warren Buffett, and why trend following may work by providing liquidity to hedgers.Topics covered:Why the stock market may be looking through today’s headlines to future earnings and AI-driven fundamentalsAdam Parker’s argument that valuation does not work well as a standalone stock-picking signalWhy estimate revisions, earnings beats, and gross margin changes may matter more than cheap P/E ratiosRobert Hagstrom on Harry Markowitz, Benjamin Graham, and the debate over whether volatility is the same thing as riskHow modern portfolio theory shaped active management, index funds, and the way investors think about diversificationWarren Buffett’s casino and cathedral metaphor for separating stock prices from business ownershipEric Crittenden on why hedgers may willingly lose money on trades to reduce business risk and lower cost of capitalWhy trend following may earn a risk premium by providing liquidity to hedgers in their moment of needHow systematic investors should think about tinkering with models during drawdownsRobert Hagstrom’s story about Bill Ruane and the importance of finding the right clients and investorsTimestamps:00:00 Risk, valuation, and hedging in this week’s best clips04:06 Adam Parker on why the market may still be trading on fundamentals08:49 Why cheap stocks are often cheap for a reason14:37 Robert Hagstrom on Harry Markowitz and the birth of modern portfolio theory18:50 How portfolio theory became the institutional language of investing22:27 Eric Crittenden on hedgers, cost of capital, and who is on the other side of the trade27:51 Adam Parker on why firm-wide market outlooks are so hard to get right33:53 Robert Hagstrom on Buffett’s casino and cathedral metaphor39:16 Why gross margin change may be one of the most important stock-picking signals44:56 Eric Crittenden and Jason Buck on tinkering with systematic strategies49:00 Why trend following may work over the long term53:09 Robert Hagstrom on meeting Bill Ruane and learning which clients to avoid58:38 Why firing the wrong clients can strengthen an investment business