Mosaic Theory

Overview

The mosaic theory is an analytical approach used by security analysts to value companies and their securities. It involves gathering and synthesizing a wide range of information — public, non‑public (but non‑material), and seemingly insignificant details — to form a cohesive view of a company’s prospects and valuation.

Key points

• Analysts combine many small pieces of information to reach a material conclusion about a security.
• Sources can include formal filings, industry contacts, employee signals, consumer trends and other publicly available data.
• The method is accepted as a legitimate research technique but raises legal and ethical issues when analysts rely on material nonpublic information.

How it works

Analysts build a “mosaic” by layering data from diverse sources:
* Public filings and financial reports (10‑Ks, 10‑Qs)
* Industry conversations with suppliers, customers, competitors and employees
* Market and consumer signals (search trends, hiring patterns, product reviews)
* Macroeconomic and social research that affects demand or reputation

When combined, these pieces can yield insights not obvious from any single source alone. The approach requires judgment to separate innocuous, non‑material inputs from material nonpublic information (MNPI), which would be illegal to trade on.

Legal and ethical considerations

• Mosaic research itself is legal and recognized by professional bodies as a valid technique when based on public or non‑material nonpublic information.
• Using MNPI to trade or recommending trades based on MNPI is illegal and can lead to criminal or civil penalties.
• Best practice for analysts includes documenting sources and methodologies and disclosing to clients how conclusions were reached to improve transparency and demonstrate compliance.

Mosaic Theory vs. Scuttlebutt Method

The mosaic theory is closely related to the scuttlebutt method popularized by Philip Fisher. Both rely on gathering many small, non‑material facts — through conversations and firsthand observations — and aggregating them into a meaningful investment thesis. The main difference is largely stylistic; both emphasize qualitative, on‑the‑ground intelligence alongside formal financial analysis.

Practical sources and techniques

Investors and analysts commonly use:
* 10‑K / 10‑Q reports — for financial trends, accounting anomalies and risks.
* LinkedIn and Glassdoor — to infer hiring trends, turnover, management changes and morale.
* Google Trends and search data — to gauge consumer interest in products or services.
* Research centers and public opinion data (e.g., Pew Research) — to assess macro trends and reputation risks.

These tools make mosaic-style research more accessible to informed retail investors, but they require discipline to avoid drawing conclusions from unreliable or legally sensitive information.

Best practices

• Verify and corroborate information from multiple independent sources.
• Maintain records of how nonpublic inputs were obtained and assessed.
• Consult compliance/legal teams when in doubt about whether a piece of information might be material and nonpublic.
• Be transparent with clients about the sources and limits of the analysis.

Conclusion

The mosaic theory is a structured way to synthesize varied, often non‑obvious information into an investment view. When used responsibly — without relying on material nonpublic information — it can enhance fundamental analysis and uncover insights that traditional models might miss.