Having a finance degree did not make me a better investor.

Rather, I learned 10x more about investing from Twitter University.

🧵 Here are 5 threads from world-class Fintwitters.

Jeff Bezos left a lucrative career at 30 to start an online book store.

His letters since founding Amazon are full of insights into investing, decision making and life.

I have consumed all of Jeff's letters and interviews since 1997.

This is what I have learned:

1. The regret minimization framework

Jeff would imagine himself at age 80, "What have I regretted in life?"

And work backwards to guide your present decisions.

Most of our regrets are from the things we didn’t try, the risks we didn’t take, or the paths we didn’t travel.

2. It's all about the long-term

Competition is sparse when you are competing in decades.

Many companies make decisions based on the next three to five years.

Bezos is investing for the next two decades.

3. Maximizing shareholder value

A company's value today is the present value of future cash flows.

85% of a company's value are from year 3 and beyond.

Invest today to ensure that a company achieves durable growth in the future.

4. Focus on the customers

Focus on solving problems and the share price will take care of itself.

Share prices in the short-run has no indication as to how well the company is doing.

Marathon Asset produced several iconic investors such as Nick Sleep and Jeremy Hosking.

Their letters from 2002 to 2015 provided a treasure trove of insights into their investment frameworks and how they look at the capital cycle.

Here are my main takeaways:

1/ Periods of high profitability leads to reckless investments.

When profits are high:

-Boost CAPEX with little regard for ROIC
-Competitors will follow suit to avoid losing market share
-CEO's incentives aren't aligned with shareholders

It's a race to the bottom.

2/ The capital cycle will swing down when investments are taken too far.

Forecasts that were reasonable will now look overly optimistic.

Profits collapse, management teams are changed, CAPEX is cut, and consolidation begins.

This will pave way for a recovery of profits.

3/ Asset growth matters

Consider both asset growth at the company and industry level.

Avoid industries where assets are growing rapidly.

4/ We tend to extrapolate

When overdone, investments that appear logical at first can become disastrous.

We have a tendency to forecast linearly when many things are cyclical.

Examples: trade cycles, credit cycles, etc

Youtube provides us access to the top investors worldwide.

But 98.8% don't use it to its full potential.

Five videos that provide the best investing insights:

What you learn: Fundsmith investing philosophies and company's thesis.

From: Terry Smith, founder of

What you learn: Characteristics of compounders & understanding your competitive edge

From: @yliownyc and @tseides

What you learn: How to research a stock from scratch

From: @BrianFeroldi and @Brian_Stoffel_

What you learn: What makes internet stocks attractive?

From: @DennisHong17 and @goodinvestingc

At 98, Munger is as sharp as ever.

His recent 2-hour sharing at $DJCO was 🔥

Talked about $BABA, $COST, $ATVI, crypto, interest rates, envy, antitrust, the great resignation, growth vs value investing and MORE.

Here are my notes:

1. Let's get the white elephant out of the room and talk:

$BABA

Why invest in China? And why Alibaba?

To find out more about $BABA without going through 10 years of annual report, check out my deep-dive here.

More than 20,000 people have viewed it in 7

2. It's no secret that Munger has a contempt for crypto

While there are legitimate use cases (IMO), Munger hates the negative spillover it brings.

3. On whether there'll be a major interest rate increase

Japan managed to maintain low interest rates and reduce their debt without compromising their living standards.

But we're not sure if the U.S. can pull off the same trick.

Here's why:

Terry Smith is often referred to as "the English Warren Buffett".

He runs Fundsmith which has a fund size of £27.9bn.

Despite the size, Fundsmith did a CAGR of 18.4%.

In his book Investing for Growth, he explains his investing philosophy.

Here's a breakdown:

1. Fundsmith's winning formula

Find companies that focus on delivering value.

Not those who are looking to pacify Wall Street with short-term results.

2. Avoiding "cheap" companies?

Low multiples are not a reason to buy a company.

A ship will continue to sink if it has a hole in it.

"A stock may have a low valuation but an even lower intrinsic value. Buying such a stock is not a recipe for investment success."

3. Getting quality right

For long-term investors, getting the quality of the business is more important than the valuation.

“An investor could have paid 281 times earnings for L’Oréal, 156 times for Colgate, and 147 times for Brown-Forman and still beat the market.”

4. "Unprofitable" companies could be good investments

Many of the best companies don't show earnings today.

But that's because they're heavily reinvesting for the future.

It's just that the earnings hasn't show up.

BEST VALUATION FACTOR

Price to earning below:10

Price to book below:2

5 years ROE:more than 20%

If you follow these points then you won’t overpay & your return would be bigger than anyone

it’s very tough to get any stock now but there were lots of stock last year
#investing

Market PE at 40 and yet the market is not falling, why? Getting asked this question multiple times. Here's a thread covering ‘very basic’ premier on valuation for my retail investor friends.

Do hit the ‘re-tweet’ and help us educate more investors (1/n)

For us to be able to comprehend the situation, we need to understand 4 very basic valuation matrixes
(1) Trailing EPS
(2) Forward EPS
(3) Trailing PE
(4) Forward PE

Formula

EPS = Profit After Tax / Number of outstanding Shares
PE = Market Price / EPS (2/n)

So what's a trailing EPS?

So in March 2020, RIL generated a Profit after tax (PAT) of 39,354 cr. The number of outstanding shares of RIL is some 676.21 cr. which means the 39,354 cr of PAT belongs to the 676.21 cr. shareholders, right? (3/n)

That also means that per share, RIL earned Rs. 58.20 (39,354/676.21). This 58.20 is called the trailing (TTM) EPS. Trailing means past, already done. (4/n)

So RIL earns 58.20 rupees per share but you pay 58.20 * 33.16 = 1930, 33.16 times more to buy 1 share from the market, that 33.16 is called the Price/Earnings (PE) ratio. This is again trailing as 58.20 EPS is trailing. (5/n)

Worried about the recent market drop?

Here are 24 top investing quotes from Buffett, Bogle, Graham, and more that can help🧵

"If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks."

-- John Bogle

"Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble."

-- Warren Buffett

“Individuals who cannot master their emotions are ill-suited to profit from the investment process”

-- Benjamin Graham

"A calm sea does not produce a skilled sailor."

-- Tom Culve

Excellent article on Investor psychology & Market cycles based on Howard Marks' "Mastering the Market Cycle".

cc: @dmuthuk @Gautam__Baid

My fav pts 👇

continued...

Excellent pts 👇

✔️Mania and risk
"The combination of feedback loops and irrational exuberance, where newfound expectations and enthusiasm, encourages investors to bid up and rationalize extraordinary growth in asset prices.

By contrast, during periods of fear and pessimism, many face difficulties with identifying potential future value beyond the immediate-term.

An understanding of where attitudes to risk sits within the current investor psychology cycle can be a useful knowledge advantage.

Some Excellent articles on Financial Ratios and Analysis.
h/t @discover_ci 👏

1⃣ Profitability

2⃣Liquidity

3⃣Leverage

4⃣Asset Management

5⃣Financial Analysis: What It Is and Tips for Getting it Right.

✔️Determining a Company’s Key Performance Indicators
✔️Collecting Company Financial Statements & Calculating Financial Ratios
✔️Analyzing Operating Results & Financial