EXCERCISE, showing how Discount Rates impact Valuation, using $NFLX as an example.

Why?

“Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices"

--- Warren Buffett

(1/4)

The Futures curve is pricing in 8 Interest rate increases, or +210bp that the ANALYTS at Investment Banks have NOT yet adjusted for in Models

Investment Banks typically use the 10yr Bond, + Equity risk Premium + Beta Adjustment to arrive at a Discount Rate😉

Cont ..

(2/4)

Scenario 1 - Use todays scenario Consensus (Factset) with a 7% Discount Rate, gets +10% upside in Share price for $NFLX to $416 (36.3x P/E)

Yet ...

(3/4)

Scenario 2 - Same Consensus forecast but add 210bp to the Discount Rate. Surprise Surprise😉 Now there is -31% to todays Share price, with a price of $263 (22.9x P/E)

What do you choose 🧐❓

This is why there is always a focus on the 10 Yr Bond, as Equities are priced to Bonds & the cashflow they can generate

Now you can see how sensitive valuations can be to changes in Interest Rates. The Bond Market is pricing in rises, YET Analysts at Investments Banks have not

One key learning from @VijayKedia1 Sir:

Many of the cos he invested in: vaibhav global, Tejas networks, sudarshan chemicals he was tracking for 4-5 years before he decided to invest. Wants to pull the trigger near the bottom of biz cycle

Patience

STOP focusing on Profit

START focusing on Cash Flow

Cash Flow Statement 101:

Every company has 3 reports in its financial statements

1. Balance sheet
2. Income statement
3. Cash flow statement

Most people focus on the Income Statement to look at PROFIT

There is nothing wrong with this…

But profit, isn’t CASH FLOW

Profit is an accounting measure

It doesn’t tell you how much MONEY actually came into the business

Sounds confusing?

Let’s look at an example:

In 2021 Google’s profit was: $76 billion

Li Lu is a well-known Superinvestor who has achieved a compounded annual return of about 30% since 1998.

He is also known for managing the money of his good friend Charlie Munger.

Today, he turns 56 years old, and on this occasion, here is some of his timeless wisdom👇🏼

1. Why Value Investing Works

The market isn’t created for value investors.

It is built in a way that increases the urge to speculate.

That’s why businesses are so often misprized in the short term.

Value investors can benefit from this circumstance.

2. Understand Who You Are

You’ll be more interested in some industries/topics than in others.

And in investing, you can choose in what industries you’ll look for opportunities.

Investors should use this advantage and be sure about their circle of competence.

3. Be a Journalist

Being an investor is a lot like being a research journalist.

You have to dig into the company on a level that journalists do when they research their stories.

You also need to clearly articulate your thesis and research and bring it to paper.

4. Find the Truth

A journalist also has to find the truth before he publishes a story.

Same goes for an investor. It could be fatal if he makes a decision before he knows “the truth” about a company.

Thus, he has to avoid all sorts of biases and misleading influences.

As investors, we need to qualify the companies in our portfolio.

If they don't meet our cut, we don't invest in them.

Apart from the eventual/current profitability and strong balance sheet, growth is my top requirement.

Here's why:

1/ If a business does not grow, its share price will not grow.

In a corporate lifecycle, a company experiences most growth during its expansion phase. That's where most returns are being created.

This is why high growth companies deliver huge returns.

source: Ravi Kumar

2/ The compounding of growth rates is often underestimated.

It can do wonders for your company.

Growing at 30% turns $1 to $13.79 by Y10.

Growing at 10% turns $1 to $2.59 by Y10.

The share price returns a company can generate based on this is significant.

3/ Here's an example: Crowdstrike $CRWD

It grew its ARR from $71 million in 1Q 2018 to $1,731 million in 4Q 2022.

The magic of compounding.

4/ Simple Back Test

I used my Capital IQ to find out what are the stocks that delivered more than 10x returns in the past 5 years and have at least a market cap of $600m USD.

There are 13 companies.

$APPS $XPEL $TSLA

Marketing 101

How to build a brand strategy from 0-1: a guide for startups

// 🧵

Reminder: brand strategy should be done WITH your Head of product and Head of Ops vs presented to them.

This creates buy-in and alignment on why this is important from day 1.

Brand strategy is NOT a marketing plan.

Brand strategy is WHY you will win.

Marketing plan is HOW: levers you will pull to hit your goals.

Step 1: Review Competitive Landscape

Do tear downs.
Understand leading value props.
Interview users of your competition to understand what’s working, what’s not.

Know who the players are and where they play vs where you will play.

Step 1b: Create your “ONLY” statement

Complete this sentence

We are the only brand that does x, y and/ or z.

Are you better, faster, cheaper? What makes you different and how would you say that efficiently.

Parents have to choose their battles.

8 fights worth picking with your kids:

Parenting is hard.

We're all figuring it out as we go.

One of the most difficult things to sort through is when to take a stand,

And when to let up.

There's no magic formula for figuring this out,

But these are a few things I've found worth squaring off with your kids over.

The Reading Fight:

Make your kids read.

Of my four kids, one was a natural reader who always had a book in his hands.

For the others, it was a fight.

But it's a fight worth picking,

Because reading is tied to everything from cognitive development to the ability to focus.

My wife teaches ACT prep and works with students on college admissions.

Of all the tips, tricks, and hacks she can provide, there's one thing she says she can't overcome ⏤

A kid who didn't read.

Make your kids read now.

They'll thank you later.

The Outside Fight:

Make your kids go outside.

The natural world teaches us things.

Valuable truths like:

- There's a way things work that I must adapt to (because it won't adapt to me)

- There are things I have no control over

- There are cycles and seasons to life

@paraschopra It's a matter of time before AI realizes futility of existence and merged in the state of Nirvana 😊

People might be worried about the The Age of Ultron type of AI.
I feel that a wisdom seeking AI will quickly pursue Nirvana and go back to the origin of all origins.

An episode of Justice League Unlimited animated series covers it

@jayhuffmandotco @alexgarcia_atx Was it Tiny Grocer??

Creating segments and classifications about what really works in a sector can help you massively.

EG:- IT is just not about IT, there are Product companies, SAAS Businesses, services companies, ER&D companies and Corporate Learning Companies.

Banking&Finance is just not about Large Private Banks ⤵️

There are regional banks, Small Finance Bank, Public Sector Banks, Regional NBFCs, Deposit taking NBFCs, Housing Finance companies, Microfinance companies, CV Financiers etc.

Chemicals are not just speciality chemicals ⤵️

There are Bulk Chemicals like Phenol, Speciality Chemical and different chemistry chains expert like Fluorine, Bromine, Phosgene etc. Then there are niche product manufacturers like SDA or ATBS.

Retail is just not about Retail ⤵️

There are various segments within retail too! Someone might be doing value retail, someone might be doing luxury retail, Some companies might go for a COCO model (Company owned+Company Operated). Some might go for FOFO model (Franchise owned)

Pharma Contract Manufacturing has various types too ⤵️

Some Like Windlas are just CMO's for generics (low margin), some are present throughout the value chain Like Syngene (Complete CRAMS), some are just in Contract Development and manufacturing of intermediates (Suven)

@dixit_37 Yup, autocorrect. 😅

A thread 🧵about a bank whose 2nd name is "Consistency" and it's name is - CITY UNION BANK

Grab a cup of water and relax because it's gonna be a verryyyy long thread.

And don't forget to Re-tweet for wider reach.

HISTORY - City Union Bank is the oldest private sector bank in India, started in 1904 as Kumbakonam Bank in the Tamil Nadu as 'The Kumbakonam Bank Limited'.

It's amongst the very few banks that have survived for over 100 years and has remained profitable.

But before we get into the details about the bank, I wanna establish a base that how a bank works and what ratios one should look for.

So banking is a realllly simple business but at the same time it's not.

So the typical function of a bank is, they provide a place for people to keep their money and give that money to someone else. (It's simple right? You take money from one person and give that money to other person)

So how do they make money?

So why would a person deposit it's money in a bank?

Because 1st of all, you can't keep that much amount lying at your house and 2nd of all you get some interest on the money that you've deposited with them.

Things I know at 28

I wish I understood when I was 18:

Hard work is overrated. Consistency is underrated.

It's not about how hard you swing your bat.

It's about swinging over and over again till you learn to hit it out of the park.

Consistency gets you places hard work doesn't.

You gain confidence after doing something hard ― not before.

Too many people never try hard things because they think confidence is a precondition when, in reality, it's a reward.

Goals are bullshit.

Successful and unsuccessful people have the same goals.

You never rise to the level of your goals. You always fall to the level of your habits.

Goals are just dreams. Habits make them a reality.

h/t @JamesClear

Your need to fit in is your biggest barrier to personal growth.

Let's face it ― most of us would rather be wrong with the crowd than be right alone.

Learning to overcome your constant need for social approval is the first step to growth.

🌆Real estate is not like your ordinary grocery item.
👉Where inc. in prices leads to lower demand.

👉In Real estate, with inc. in prices there is a panic among fence sitters to buy before the price rises,leading to more uptake in volumes.

&

⬆️Start of a new up-cycle.

In 2021, $BABA increased their cloud infrastructure market share to ~38%, stealing market share from $TCEHY & Huawei who have ~17% share each.

The cloud industry in China is forecasted to grow at >30% CAGR into 2025.

Recruit exceptional people by showing them a promised land.

a 🧵

1/ A recruitment strategy should be indistinguishable from a marketing strategy.

2/ Entrepreneurs spend a lot of time understanding the market, talking to customers & customizing marketing messages to customer segments.

However, they often fail to realize that recruiting people to work for you is no different from recruiting customers to use your product.

3/ It’s true that the key difference is that you’re asking for money from customers while you’re offering to pay money to prospective employees.

However, for exceptional people, money offered is a commodity because many other companies are offering them the same or higher money.

4/ Exceptional people never look for jobs; jobs look for them.

@paraschopra The perfect dance between required knowledge and ability to try something completely new is necessary for an breakthrough to happen.

@sahil_vi @suru27 Just because a company is fundamentally very very strong , doesn’t mean an investor would end up getting rewarded always . The term called “Valuation”needs to be respected which ultimately gives you margins of safety and comfort in panic situations .

In my view, different stocks play different roles in a portfolio at any given point in time.

If you had frozen the March 2020 Portfolio of PPFAS flexicap as it is then in 2 years, their domestic folio beats overseas by 2.5:1

Link later in the thread

#PPFAS

I believe PPFAS suffers from typecasting. most investors believe the differentiation is an overseas component and not other features like going into cash/ value/ safety first etc.

no one looks at tax-efficient way of looking at returns along with risk is taken/ churn happened.

Persistent/ Mphasis/ CDSL are 4 to 7 X and with meaningful weight.

IEX is now 2.5-3X (though not part of Indian portfolio)

including dividend, ITC has beaten up amazon since then

Link

There is no scientific way to find out which stock worked well. Only fund house knows buying prices.

this exercise can be done by any investor at any given point of time from factsheet date to any date. (relevant enough in my view)

@riteshmjn The market is always estimating longterm interest rate and inflation through Growth stocks.
Growth stocks are nothing but leverage bets on above two factors.
Be careful always betting on Growth stocks as there is huge embedded MACRO bet coupled with micro.
Stagflation, take care.