Types:
Business Services $MCO
Contracts $AMT
Consumables $MNST
Exchange $MKTX
Franchise $WINA
Membership $TDOC
Platform $ETSY
Razor/blade $DXCM
Real Estate $STOR
SaaS, PaaS, IaaS $TWLO, $NOW, $FSLY
Subscription $NFLX
Tollbooth $BIP
My investing style: Buy and hold high-quality businesses
Here are 15 traits that tell me I've found a great business ⬇️
Types:
Business Services $MCO
Contracts $AMT
Consumables $MNST
Exchange $MKTX
Franchise $WINA
Membership $TDOC
Platform $ETSY
Razor/blade $DXCM
Real Estate $STOR
SaaS, PaaS, IaaS $TWLO, $NOW, $FSLY
Subscription $NFLX
Tollbooth $BIP
Great companies sell products/services that are in-demand in good times and bad
That allows them to grow regardless of what is happening in the broader economy
"Organic" growth: Growing by increasing sales of internally developed products/services
"Inorganic" growth: Growing from mergers & acquisitions
Organic Growth > Inorganic Growth
Indicates that the company’s products/services create a huge amount of value for the customer
Rising gross margin also indicates pricing power
Capitalism is brutal
A widening moat will protect a company's profits from competition
Sources:
Network effects: $FB
Switching costs: $ADBE
Durable Cost Advantage: $WMT
Premium Brand: $PTON
Patents: $OLED
Counter-Positioning: $TSLA
If a company can grow its costs at a slower rate than revenue then its profits will grow at a FASTER than revenue
This concept was visualized beautifully by @10kdiver
https://t.co/2RhrI7IzFy
Not only does @10kdiver produce some killer threads,
— Brian Feroldi (@BrianFeroldi) March 11, 2021
He's super talented with animation too!
Here's how to visualize operating leverage: pic.twitter.com/3R7vr4rOiU
The best marketing is no marketing
Great companies create demand through word of mouth and spend little on sales & marketing
Companies that depend on a few customers for most of their revenue are fragile
One customer leaving can ruin the investing thesis
Great businesses serve thousands of customers, not just a few big ones
Management matters
Here is a thread I wrote in what I look for in a great CEO
https://t.co/PuM6EXCxYH
10 Traits Of A Great CEO
— Brian Feroldi (@BrianFeroldi) May 9, 2021
A \U0001f9f5on how I judge management
Great businesses can reinvest profits back into themselves at high rates of return for long periods of time
This continuously grows the profit stream, which will eventually lead to share price appreciation
Companies that produce profits have far more control over their destiny than companies that don’t
I want to see that both net income & free cash flow are positive & growing
Great companies create new revenue opportunities for themselves by launching new products/services that open up new markets
Ex:
$AMZN -> AWS
$MELI -> Payments
$TSLA -> Energy Storage
I want to own companies that have only captured a small fraction of their opportunity
That creates a long runway for continued growth
Companies that sell commodities have no control over the price of their product
I want to own price makers, not price takers
Cash-rich companies get stronger in downturns
Debt-laden companies get weaker in downturns
I regularly tweet about money, investing, and self-improvement
If those topics interest you, follow me
@BrianFeroldi
We do so weekly on my YouTube channel
https://t.co/2YidjLLghL
More from Brian Feroldi
Last week, I asked my followers to share their favorite Twitter threads
I receive tons of wonderful replies and read through them all
Here are 31 amazing threads that are well worth your time ⬇️
1/ @10kdiver on
2/ @aaronbush100 on 20 semi-controversial investing
3/ @annieduke on category
4/ @awilkinson on losing
I receive tons of wonderful replies and read through them all
Here are 31 amazing threads that are well worth your time ⬇️
1/ @10kdiver on
1/
— 10-K Diver (@10kdiver) April 10, 2021
Get a cup of coffee.
In this thread, I'll walk you through the basics of leverage -- in our personal lives and in the companies we invest in. pic.twitter.com/9MilmwE9f7
2/ @aaronbush100 on 20 semi-controversial investing
20 semi-controversial investing beliefs [THREAD]:
— Aaron Bush (@aaronbush100) May 24, 2020
3/ @annieduke on category
The most dangerous category of poor decisions are ones that remain easily hidden from view because any instance of that type of decision is so easy to rationalize.
— Annie Duke (@AnnieDuke) October 7, 2020
1/12
4/ @awilkinson on losing
This is a story about how I lost $10,000,000 by doing something stupid.
— Andrew Wilkinson (@awilkinson) March 30, 2021
Ten. Million. Dollars.
Literally up in smoke. Money bonfire.
That\u2019s enough to retire with $250,000+ in annual income.
Here\u2019s what happened\u2026
More from Finance
Having made over 1000 boxes for vulnerable families in Cambridge via @RedHenCambridge (thanks to our customers 🙏🏽) My thoughts on the £30 box thing. Lots of factors at play here. 1/
If the pics in this @BootstrapCook thread are true and correct then the Govt/taxpayers & families in need are getting absolutely SHAFTED 👇🏽 2/
There are some mitigating circumstances. A £30 box won’t ever contain £30 (retail) worth of food - people aren’t factoring in
-the cost of the box
-paying someone to fill it
-rent & rates
-& most expensive the *transport/distribution*
3/
If you’re doing the above at scale. Delivering *across the UK* it’s not cheap BUT IMHO there should be at LEAST £20 worth of groceries in a £30 box. To get more value they need more fresh produce. Just carrots & apples is terrible. 4/
I’m gonna put my rep on the line here & say something about these big national catering companies whose names I’ve seen mentioned. They are an ASSHOLE to deal with & completely shaft small businesses like mine with their terms which is why I won’t deal with them. 5/
If the pics in this @BootstrapCook thread are true and correct then the Govt/taxpayers & families in need are getting absolutely SHAFTED 👇🏽 2/
Hi all. I\u2019ve been sent LOTS of photos of the food parcels that have replaced the \xa330 vouchers and asked what I would do with them. I\u2019m replying with advice privately because to do so publicly would look like justifying these ill thought through, offensively meagre scraps /1.
— Jack Monroe (@BootstrapCook) January 11, 2021
There are some mitigating circumstances. A £30 box won’t ever contain £30 (retail) worth of food - people aren’t factoring in
-the cost of the box
-paying someone to fill it
-rent & rates
-& most expensive the *transport/distribution*
3/
If you’re doing the above at scale. Delivering *across the UK* it’s not cheap BUT IMHO there should be at LEAST £20 worth of groceries in a £30 box. To get more value they need more fresh produce. Just carrots & apples is terrible. 4/
I’m gonna put my rep on the line here & say something about these big national catering companies whose names I’ve seen mentioned. They are an ASSHOLE to deal with & completely shaft small businesses like mine with their terms which is why I won’t deal with them. 5/
