- PF comprises of 20-30 stocks held for 3+ years, sector & market cap agnostic
- Weightage of 3-5% per stock, exceptional opportunities get 10%
- Ranks PF cos based on valuations, earnings perf & expected stock returns to rebalance
Absolutely amazing presentation by @Gautam__Baid in the @soicfinance's conversation with super investors series.
@Gautam__Baid said that the key attribute of great investors is their Focus on Process, with this in mind,
Let's deep dive into his Investing Process 🧵🧵🧵
- PF comprises of 20-30 stocks held for 3+ years, sector & market cap agnostic
- Weightage of 3-5% per stock, exceptional opportunities get 10%
- Ranks PF cos based on valuations, earnings perf & expected stock returns to rebalance
"He who turns over the most rocks - wins"
- Stock mkt takes time to adjust to higher intrinsic value so even if you buy after a big breakout earnings there is a chance to make good returns
contd.
- Usually post IPO new high coincides with some imp biz development in the co.
- For microcaps, Credit Rating reports and IR section on website are good info sources
- DRHPs and QIP docs used for industry data
- Fund manager's top holdings (https://t.co/aOzskNgCIv)
Price Action:
- Bull Market ~ look at stocks hitting multi-year high
- Bear Market ~ look at 3/6m high
- Sideways market ~ look at stocks breaking out to new 52w high
- Process should be something that is repeatable & scalable. Outcomes may not always be positive but by focusing on process we can maximize our chances of good outcomes.
Track:
- Key company metrics
-Industry developments (supply consolidation - Real estate, regulatory changes - Ethanol blending, trends - music streaming)
- Investment activities (PE/MF, etc)
- Corporate Events (Demerger, Promoter change)
- Value traps are like melting ice cubes, P/E looks attractively low but focus on earnings trajectory to avoid value traps
- Biggest mistake is investing in cos with bad accounting/CG
It is big list but can help in avoiding big blow ups.
- View of current & ex employees can be checked out at https://t.co/r7ZAdAXXVi
- Evaluation of volatility in depreciation policies, expense w/off from reserves instead of P&L
- Nealy 90% of the returns in the Long term is due to sales and profit as compared to around 42% in the short term
There are 3 sources of edge for an individual investor:
- Information edge ~ gone with the rise of internet
- Business analysis edge ~ reducing with smart investors entering the markets
- Behavior & Temperament edge ~ the most durable edge for an investor
- Ride capex plays through a full industry cycle (downturn to upturn)
How to choose cos during the down cycle?
- Check the Balance Sheer esp. Cashflow (op) and levels of debt
- Evaluate whether they have the strength to withhold another 2y of downcycle
- Stock market does not re-rate the business immediately. They re-rate them when earnings growth is clearly visible.
- receipt of large order/landmark contract (eg. Navine Flourine)
- future plans in presentation (eg. Natural Capsules)
- sudden increase in MV of co's bonds, bonds are more sensitive to stocks (eg. Rain industries in 2017)
- To be a successful investor, you don't need to do a precise DCF calculation.
You just need to have a DCF mindset, focusing on drivers of terminal value (which drives multiple rerating)
- Be a business analyst, not a securities analyst
- Intrinsic value is the sum of Cash flows (CFs) discounted for the time value of money & the uncertainty of receiving those CFs
- Predictability of CFs is an important factor, less predictable CFs need to be discounted at a higher rate
- Predictability of LT growth matters more to the market than absolute rate of ST growth
(stock promising earnings growth for next 2y but no clarity thereafter which get low valuations)
- Longevity of growth
- Market provides disproportionate rewards to cos that can promise years of sustainable earnings.
Thus, you see cos with 12-15% predictable earnings growth for next 10-15y getting 40-50 times P/E
There are 2 kinds of demerger plays:
Opportunities created by forced selling.
- Mcap related ~ since large institutions can't hold micro or small caps there is forced selling creating opportunity (eg. Aarti Surfactants)
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1/ Some initial thoughts on personal moats:
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
I'm increasingly interested in the idea of "personal moats" in the context of careers.
— Erik Torenberg (@eriktorenberg) November 22, 2018
Moats should be:
- Hard to learn and hard to do (but perhaps easier for you)
- Skills that are rare and valuable
- Legible
- Compounding over time
- Unique to your own talents & interests https://t.co/bB3k1YcH5b
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
People talk about \u201cpassive income\u201d a lot but not about \u201cpassive social capital\u201d or \u201cpassive networking\u201d or \u201cpassive knowledge gaining\u201d but that\u2019s what you can architect if you have a thing and it grows over time without intensive constant effort to sustain it
— Andrew Chen (@andrewchen) November 22, 2018
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
Things that look like moats but likely aren\u2019t or may fade:
— Erik Torenberg (@eriktorenberg) November 22, 2018
- Proprietary networks
- Being something other than one of the best at any tournament style-game
- Many "awards"
- Twitter followers or general reach without "respect"
- Anything that depends on information asymmetry https://t.co/abjxesVIh9
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
#sculpture #story -
Chandesha-Anugraha Murti - One of the Sculpture in Brihadeshwara Temple at Gangaikonda Cholapuram - built by Raja Rajendra Chola I
This Sculpture depicts Bhagwan Shiva along with Devi Paravathi blessing Chandeshwara - one of the 63 Nayanmars.
#Thread
Chandeshwara/Chandikeshwara is regarded as custodian of Shiva Temple's wealth&most of Shiva temples in South India has separate sannathi for him.
His bhakti for Bhagwan Shiva elevated him as one of foremost among Nayanmars.
He gave importance to Shiva Pooja&protection of cows.
There are series of paintings, illustrating the #story of Chandikeshwar in the premises of
Sri Sathiyagireeswarar #Temple at Seinganur,near Kumbakonam,TN
Chandikeshwara's birth name
is Vichara sarman.He was born in the village of Senganur on the banks of River Manni.
His Parent names were Yajnathatan and Pavithrai.
Vichara Sarman was a gifted child and he learnt Vedas and Agamas at a very young age.
He was very devout and would always think about Bhagwan Shiva.
One day he saw a cowherd man brutally assaulting a cow,Vichara Sarman could not tolerate this. He spoke to cowherd: ‘Do you not know that the cow is worshipful & divine? All gods & Devas reside in https://t.co/ElLcI5ppsK it is our duty to protect cows &we should not to harm them.
Chandesha-Anugraha Murti - One of the Sculpture in Brihadeshwara Temple at Gangaikonda Cholapuram - built by Raja Rajendra Chola I
This Sculpture depicts Bhagwan Shiva along with Devi Paravathi blessing Chandeshwara - one of the 63 Nayanmars.
#Thread
Chandeshwara/Chandikeshwara is regarded as custodian of Shiva Temple's wealth&most of Shiva temples in South India has separate sannathi for him.
His bhakti for Bhagwan Shiva elevated him as one of foremost among Nayanmars.
He gave importance to Shiva Pooja&protection of cows.
There are series of paintings, illustrating the #story of Chandikeshwar in the premises of
Sri Sathiyagireeswarar #Temple at Seinganur,near Kumbakonam,TN
Chandikeshwara's birth name
is Vichara sarman.He was born in the village of Senganur on the banks of River Manni.
His Parent names were Yajnathatan and Pavithrai.
Vichara Sarman was a gifted child and he learnt Vedas and Agamas at a very young age.
He was very devout and would always think about Bhagwan Shiva.
One day he saw a cowherd man brutally assaulting a cow,Vichara Sarman could not tolerate this. He spoke to cowherd: ‘Do you not know that the cow is worshipful & divine? All gods & Devas reside in https://t.co/ElLcI5ppsK it is our duty to protect cows &we should not to harm them.