One of the long-term investor's greatest advantages is the utilization of a concept known as time arbitrage. Investopedia defines time arbitrage as :

An opportunity created when a stock misses its mark and is sold based on a short-term outlook with little change in the long-term prospects of the company. This miss occurs when a company fails to meet earnings estimates by analysts or its guidance, resulting in a short-term stumble where the price of the stock decreases. Some investors use time arbitrage to increase their chances of outperforming the market.

Basically this means that as long-term investors, we can use Wall Street's short-term focus to our advantage. As the sell-first-and-ask-questions-later crowd is running for the exits, we can calmly step in and buy shares of great businesses at more attractive prices.

But here's the key: We must have confidence that the business's long-term competitive advantages are still intact. Otherwise, we may be stepping in front of a bus. For if the company's short term struggles are signs of further danger ahead, buying ahead of that decline will lead to steep losses. However, if nearsighted traders are overestimating the impact of a temporary downturn in a company's business performance, buying into that weakness could give long-term minded Fools a powerful profit opportunity.

The ability to tell the difference between a business that is in a state of decline and one that is only temporarily struggling and poised for a rebound is often a key factor in whether an investor can earn market-beating returns. At Tier 1 Investments, a Motley Fool Real-Money Portfolio, I've used time arbitrage to help us achieve an 80.91% return since Tier 1 was launched on September 1, 2011, besting the S&P 500 by 811 basis points over that time. And today, I believe I've found another time arbitrage opportunity in LinkedIn (NYSE:LNKD).

The sell-off
LinkedIn shares are down more than 30% from their 52-week high as investors have begun to question the online professional network's growth potential. The company has been experiencing decelerating revenue growth, with management recently issuing second-quarter sales guidance that came in below Wall Street's estimates.

The risk
Even after the recent decline in its stock price, LinkedIn remains a high P/E multiple stock. If reported revenue or sales guidance continues to disappoint Wall Street, the stock price could continue its sharp descent.

I do not believe that will be the case.

LinkedIn has a wide competitive moat around its online professional platform, thanks to strong network effects, diversified subscription-based revenue streams, and a valuable data collection cycle that competitors can't match. And with a rock-solid balance sheet, LinkedIn has the resources to create new products and acquire others that boost engagement and make it harder for members to switch to a competitor. Together, these competitive advantages combine to strengthen LinkedIn's competitive position and protect its revenue and profit streams.

I also think it's important to note that LinkedIn actually beat analysts' estimates for revenue and earnings per share in the most recent quarter , and it has a history of exceeding its own, often conservative guidance . More importantly, LinkedIn continues to see a surge in new members (now more than 300 million) and recruiting clients , which means that it's most important metrics are steadily moving in the right direction. I believe this will -- in time -- lead to long-term revenue and profit growth that greatly exceeds Wall Street's current expectations.

The opportunity
Here's a section that I wrote in my initial LinkedIn buy recommendation that pertains to the opportunity before us:

"LinkedIn's shares, like those of many high-multiple, high-growth stocks, are likely to remain volatile. Revenue or earnings figures that come in below Wall Street's estimates could crush the shares. However, unless I see signs of a long-term erosion of LinkedIn's competitive advantages, I will probably view these periods of volatility as opportunities to add to my position in LinkedIn rather as a reason to sell."

I have seen no signs of erosion in LinkedIn's competitive position, and thanks to the recent sell-off in LinkedIn's shares, I believe we have exactly the type of profit opportunity I was referring to in the passage above. All told, my long-term investment thesis for LinkedIn hasn't changed over the last few months, yet the stock is down sharply during that time. Therefore, I will be using this opportunity to add to Tier 1's position in this highly disruptive enterprise.

The Foolish bottom line
Like Fool Co-Founder David Gardner, I like to invest in companies that lead the world forward. LinkedIn, with its mission to "create economic opportunity for every member of the global workforce,"fits that description. And as it creates opportunities for professionals around the world, I believe it will also create substantial profit opportunities for long-term investors. I want to buy ahead of that -- before other investors realize their mistake. And so, at least 24 hours after this article is published -- standard operating procedure for The Motley Fool's Real-Money Stock Picks program that's designed to give Fools the opportunity to buy ahead of us should they so choose -- I will be buying shares of LinkedIn in the Tier 1 Portfolio. 

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Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on The Fool's Stock Advisor and Supernova premium service teams. You can connect with him on Twitter @Tier1Investor. Joe has no position in any stocks mentioned.

The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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