What is information asymmetry and why is it important for investors?

Information asymmetry occurs when one party in a transaction has more or better information than the other. In business, companies that possess exclusive data or superior analytics can use this knowledge gap to their advantage—setting better prices, evaluating risks more accurately, or making smarter decisions than competitors or customers. For investors, companies that successfully leverage information asymmetry often develop strong competitive advantages that can translate into higher profit margins and sustainable growth.

How do credit bureaus like Equifax and TransUnion make money from information?

Credit bureaus collect vast amounts of consumer financial data, including payment history, credit usage, and loan applications. They package this information into credit reports and scores that lenders use to assess risk when making loan decisions. These companies profit by charging banks, lenders, landlords, and other businesses for access to this valuable data. They've created a business model where they're the gatekeepers of essential information that other companies need but cannot easily gather themselves.

Why are companies like CarMax and Carvana included in this investment theme?

Used car sellers like CarMax and Carvana have built sophisticated data systems that give them a major advantage in vehicle pricing. While most consumers buy or sell cars infrequently and lack pricing expertise, these companies have accumulated data on millions of transactions. This allows them to accurately determine a fair market price for any vehicle based on condition, features, and market trends. They profit from this information gap by purchasing vehicles at prices favorable to their business model and reselling them at optimized margins.

How does artificial intelligence impact companies in this theme?

AI and machine learning act as powerful multipliers for companies that already possess valuable data assets. These technologies allow firms to analyze larger datasets more quickly, identify subtle patterns humans might miss, and make more accurate predictions. For example, companies like Upstart use AI to analyze non-traditional data points for credit decisions, potentially identifying good borrowers that traditional credit scores might overlook. As AI capabilities advance, the competitive advantage of data-rich companies can grow even stronger, widening the information gap between them and their competitors.

What risks should I be aware of when investing in information asymmetry companies?

While information advantages can be powerful, they're not without risks. Regulatory changes could limit how companies collect or use consumer data, as we've seen with privacy laws like GDPR and CCPA. Additionally, technological disruption could reduce information gaps—if better data becomes widely available, the advantage diminishes. There's also reputational risk, as consumers increasingly scrutinize how their data is being used. Finally, high investor expectations for these companies can lead to premium valuations, which means any slowdown in growth might result in significant price corrections.

16 handpicked stocks

Information Asymmetry Arbitrageurs

These companies build their success on knowing more than their customers. Our analysts have selected businesses that create lasting value from proprietary data and analytical advantages in complex markets like credit scoring, auto sales, and insurance.

Han Tan | Market Analyst

Published on June 17

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

Fair Isaac Corp

FICO

Current price

$1,850.65

Its business is the creation and sale of credit scores, the quintessential example of profiting from a proprietary analytical model that assesses cons...

Its business is the creation and sale of credit scores, the quintessential example of profiting from a proprietary analytical model that assesses consumer information.

Equifax Inc.

EFX

Current price

$236.67

As a major credit bureau, Equifax's entire model is based on collecting, analyzing, and selling access to consumer financial data that lenders use for...

As a major credit bureau, Equifax's entire model is based on collecting, analyzing, and selling access to consumer financial data that lenders use for risk assessment.

TransUnion

TRU

Current price

$77.34

TransUnion profits directly from information asymmetry by providing businesses with consumer credit reports, analytics, and fraud detection services.

CarGurus, Inc.

CARG

Current price

$37.88

CarMax Inc.

KMX

Current price

$46.42

Carvana Co.

CVNA

Current price

$375.72

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+72.33%

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About This Group of Stocks

Our Expert Thinking

These companies profit from the knowledge gap between businesses and consumers. They've built sustainable advantages through proprietary data and specialized analytics in complex markets where information is power. This creates strong competitive moats and significant pricing power.

What You Need to Know

This collection focuses on market leaders in credit reporting, auto sales, insurance, and consumer finance. These companies don't just use data—they monetize it directly. With AI and machine learning advancements, their information advantage continues to grow stronger.

Why These Stocks

We've handpicked companies where information asymmetry is the primary driver of revenue and profitability. Each business has built defensible data assets or analytical capabilities that competitors can't easily replicate, positioning them for potential long-term growth.

Group Performance Snapshot

72.33%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 72.33% over the next year.

13 of 16

Stocks Rated Buy by Analysts

13 of 16 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🧠

The Power of Knowing More

These companies have built business models around knowing what others don't. As data becomes more valuable, their competitive edge grows stronger and their profits potentially more durable.

🚀

AI Revolution Multiplier

Advancements in AI and machine learning are supercharging these companies' ability to extract value from their data assets, potentially creating new revenue streams and expanding their information advantage.

🛡️

Defensive Moats in Uncertain Times

Companies with proprietary data and analytics often maintain pricing power even during economic downturns. Their information advantage creates barriers that competitors struggle to overcome.

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