Outline
1. Stepwise Guide
2. Practical Example: CoffeeCan Companies
3. Practical Example: Smallcap Consistent compounders
4. Practical Example: Smallcap turnaround
5. Key Takeaway
Such opportunities only come once in a few years.
Step-by-step: how to use (the free) @screener_in to generate investment ideas.
Do retweet if you find it useful to benefit max investors. 🙏🙏
Ready or not, 🧵🧵⤵️
Outline
1. Stepwise Guide
2. Practical Example: CoffeeCan Companies
3. Practical Example: Smallcap Consistent compounders
4. Practical Example: Smallcap turnaround
5. Key Takeaway
Go to "CREATE NEW SCREEN"
At this point you need to register. No charges. I did that with my brother's email id. This is what you see after that.
"Show me all largecap companies with sales growing at 20%"
Start typing the metric which you care about. In this case "sales". As I do that, screener automatically suggests many metrics it knows about each company which contain the word "sales".
Think of screener as a way to "narrow down" the set of companies in indian listed universe.
Since we care about sales growth let me select sales growth 5 years. Now, in order to narrow down, I will restrict to companies with "sales growth 5 years" more than "20%".
I 'screened' for "sales growth > -1000"
That's a Neat trick.
(i) its sales cagr should be at least 20%
(ii) its market cap should be at least 10000
that is why i use an 'AND' operator between those 2 statements.
It works exactly like english.
I did that. THis is the screener:
https://t.co/zLJSJNOSQT
Done with our 1st screener. :)
As companies change, their 5 year sales CAGR rises & falls. And they go in & out of this screener.
Perhaps the most famous formulaic search for companies is Coffee Can investing.
Recent article from @scripbox talks about what this is:
https://t.co/1UWl3ODgPy
First of all, we must lower our sales growth target from 20%. Coffee can originally prescribes 10% sales growth, let me get a bid greedy & loook for 12% sales growth.
We want growth & profitability meet our minimum bar over all periods of time (definition of consistency). Screener has 3 year, 5 year, 7 year. Then let us modify our screener.
Here is the screen: https://t.co/r2u6pXvzh0
Feel free to explore.
This is where it starts getting interesting. This is my investable universe.
What do I look for in a smallcap consistent compounder?
Well first of all its market cap should be at most 1B$ (7000cr). Because smallcaps.
Last 1 year has been tumultuous. Once in a century pandemic. Asking for 15% sales growth in such an environment not only in last 1 year, but last 3 year CAGR is a pretty strict condition. This is why my universe shrinks from 1600 to 204.
https://t.co/wzJw4Haa9A
Go study gufic. Go study intellect design.
— Sahil Sharma (@sahil_vi) February 24, 2022
Dont tell me you dont have ideas. There are literally hundreds of ideas just waiting to be studied. Specially given our special market crash situation.
Perhaps the hardest thing to capture is turnarounds. But we can capture this too.
Encoded as:
"(Return on equity - Average return on equity 5Years ) > 5"
Tips industries, Everest Kanto, Tips, NGL Fine chem, Ksolves, Palred,
See the screener for yourself:
https://t.co/SH94RaioU6
How about Midcap consistent compounders which are decently valued?
1. Market cap restriction
2. Sales growth consistently
3. ROE consistently
4. Market cap/ Sales restriction
Screener: https://t.co/DjVtALMp00
Laurus, PI, Deepak, Dixon, Varun beverages, AU small finance, apl apollo tubes, angel one, Route Movile, Balaji Amines, RHI Magnesita, Mastek, Lux, Privi specialty, Prince Pipes, Granules
Link to screener:
https://t.co/DjVtALMp00
I bet one can make a 15-20% compounder portfolio from scratch by studying these 50-60 companies.
Put your head down, get going. :)
On a related note, a thread of all my threads:
https://t.co/9zKsBzkw5s
A #meta thread of all company analyses twitter threads I have created. Will update it whenever I add a new company analysis.
— Sahil Sharma (@sahil_vi) June 21, 2021
1. https://t.co/No2TeprnzY
2. https://t.co/Ya9WfsuNsG
3. https://t.co/RthyzJ4b0p
4. https://t.co/SH94RaioU6
5. https://t.co/DjVtALMp00
https://t.co/dDVrza2mY6
But i felt that one did not go into enough detail & did not share the screeners properly & so i am trying to do it again, this time more structured.
A lot of people ask: how do you find companies to invest in? very good question.
— Sahil Sharma (@sahil_vi) July 6, 2021
How did you find RACL, Pix?
Creating this ad-hoc thread to share my process.
if you like it, please RT to benefit maximum investors. \U0001f64f
More from Sahil Sharma
Most of market does not beat the market by a lot. Which is alright.
In any activity the distribution of outcomes follows bell curve (Gaussian).
Those that are willing to put in effort reap the benefits. 😀
Otherwise we always have option to go for hard working PM's/etf/mf
For lot of consumer facing cos scuttlebutt is actually not that hard. We find reviews online (eg: app reviews on playstore, or reviews of products on social media)
B2B is hard to scuttlebutt, need to reach out to people in co and hope that are willing to talk. Connections help
In any activity the distribution of outcomes follows bell curve (Gaussian).
Those that are willing to put in effort reap the benefits. 😀
Otherwise we always have option to go for hard working PM's/etf/mf
Things to need to do before you buy a stock. I wonder though how many investors have the ability for item numbers 5, 6 & 7. I don't pic.twitter.com/E5AMVxbpNb
— Prashanth (@Prashanth_Krish) August 16, 2021
For lot of consumer facing cos scuttlebutt is actually not that hard. We find reviews online (eg: app reviews on playstore, or reviews of products on social media)
B2B is hard to scuttlebutt, need to reach out to people in co and hope that are willing to talk. Connections help
A lot of people ask: how do you find companies to invest in? very good question.
How did you find RACL, Pix?
Creating this ad-hoc thread to share my process.
if you like it, please RT to benefit maximum investors. 🙏
1. https://t.co/2bvvRSBScr
Imagine what you want in a company, codify it in the form of filters, create a screen. Example below:
"Market Capitalization > 50
AND
Market Capitalization < 3000
AND
((Average return on capital employed 5Years > 25 AND
Price to Earning < 20) OR
(Average return on capital employed 5Years > 15 AND
Price to Earning < 10))
AND
Sales growth 5Years > 10
AND
...
...
Operating cash flow 5years /5 < Operating cash flow 3years /3
AND
Operating cash flow 7years /7 < Operating cash flow 3years /3"
In this screener, i am looking for
smallcaps with a min mcap,
which have a bare minimum average ROCE & valuation accordance to the unit economics
which are also growing topline
and where operating cash flows are also increasing, on an average basis
How did you find RACL, Pix?
Creating this ad-hoc thread to share my process.
if you like it, please RT to benefit maximum investors. 🙏
1. https://t.co/2bvvRSBScr
Imagine what you want in a company, codify it in the form of filters, create a screen. Example below:
"Market Capitalization > 50
AND
Market Capitalization < 3000
AND
((Average return on capital employed 5Years > 25 AND
Price to Earning < 20) OR
(Average return on capital employed 5Years > 15 AND
Price to Earning < 10))
AND
Sales growth 5Years > 10
AND
...
...
Operating cash flow 5years /5 < Operating cash flow 3years /3
AND
Operating cash flow 7years /7 < Operating cash flow 3years /3"
In this screener, i am looking for
smallcaps with a min mcap,
which have a bare minimum average ROCE & valuation accordance to the unit economics
which are also growing topline
and where operating cash flows are also increasing, on an average basis
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I like this heuristic, and have a few which are similar in intent to it:
Hiring efficiency:
How long does it take, measured from initial expression of interest through offer of employment signed, for a typical candidate cold inbounding to the company?
What is the *theoretical minimum* for *any* candidate?
How long does it take, as a developer newly hired at the company:
* To get a fully credentialed machine issued to you
* To get a fully functional development environment on that machine which could push code to production immediately
* To solo ship one material quanta of work
How long does it take, from first idea floated to "It's on the Internet", to create a piece of marketing collateral.
(For bonus points: break down by ambitiousness / form factor.)
How many people have to say yes to do something which is clearly worth doing which costs $5,000 / $15,000 / $250,000 and has never been done before.
Here's how I'd measure the health of any tech company:
— Jeff Atwood (@codinghorror) October 25, 2018
How long, as measured from the inception of idea to the modified software arriving in the user's hands, does it take to roll out a *1 word copy change* in your primary product?
Hiring efficiency:
How long does it take, measured from initial expression of interest through offer of employment signed, for a typical candidate cold inbounding to the company?
What is the *theoretical minimum* for *any* candidate?
How long does it take, as a developer newly hired at the company:
* To get a fully credentialed machine issued to you
* To get a fully functional development environment on that machine which could push code to production immediately
* To solo ship one material quanta of work
How long does it take, from first idea floated to "It's on the Internet", to create a piece of marketing collateral.
(For bonus points: break down by ambitiousness / form factor.)
How many people have to say yes to do something which is clearly worth doing which costs $5,000 / $15,000 / $250,000 and has never been done before.
