A version of this post first appeared at The Felder Report Premium

I have spend a lot of time here focused on macro risks. So much so that you might think it’s my primary investment strategy. In this way, this focus can be misleading. My bread and butter investing profits actually come entirely from micro opportunities.

The fat pitch I look for is a combination of a few things. First, it’s cheap such that it offers a significant margin of safety. I use a variety of different valuation measures to arrive at “cheap” but I generally want to find something that trades well below its 3-year, 5-year and 10-year average valuation (using a variety of relevant metrics).

More than just cheap I want to understand what the current consensus is regarding the company and how that widespread belief is depressing the valuation. From here I want to be able to make a compelling case that this consensus is wrong. To quote Howard Marks, “To achieve superior investment results, you have to hold nonconsensus views regarding value, and they have to be accurate.”

I also want the company’s management to confirm my opinion about the stock’s valuation by putting their money where their mouths are by buying large chunks of stock. “Large” in this context just means significant for them. This could be relative to their salaries or just in comparison to prior purchases they have made. I also want to see that they have successfully traded in their own shares in the past. In other words, I want to see what I consider to be “predictive” buying.

Finally, I want the chart to confirm my view. A stock that has accelerating momentum to the downside, the proverbial “falling knife,” is not the sort of thing I want to try to catch. I want to see just the opposite: waning downside momentum accompanied by exhaustion signals and classic technical signs of bottoming.

When all of these things come together in a clear and compelling way they present a situation so attractive that I can’t not take advantage. In 2013 and 2014, I outlined how this process got me very bullish on Apple. In early 2015, I did the same for Herbalife. Last summer, I came across Western Refining. The trouble is these sorts of opportunities don’t come along very often. This is one reason I’ve spent far more time in these pages focused on macro risks.

The main reason, however, that I have been so intently focused on macro is that I strongly believe the risks in the stock market are as great, if not greater, than they have ever been, not just during my career but in history.

Ultimately, operating as a value investor in the current markets is a high wire act. Balancing micro opportunity with macro risk is more art than science and it’s very hard to do it any sort of justice in a short, weekly blog post. For a more in depth discussion of both, I recently spoke with The Investor’s Podcast regarding a micro opportunity I like:

I also spoke with Macro Voices this week regarding the major risks to the stock market I see currently:

Both of these podcasts served as inspiration for the creation of my own and I highly recommend them to anyone looking to broaden their knowledge base.