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.

Commandments of Investing Success!

Some of the key principles of investing that have helped me in my journey.

Retweet for Max reach!

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Commandment 1

Investing is a game of probabilities and not a game of possibilities. First thing that is the most important is to adapt your investing philosophy to your own circumstances. Eg:- if you are able to give less time to research then it is foolish to buy

concentrated positions or companies that are just emerging with a higher allocation.

Commandment 2

This is the one where I have been burnt in the past. Hopefully I have learnt my lesson, always pencil in conservative growth estimates. Let the business beat your low

expectations and then take a victory lap. At the end you are here to compound your capital and not look like a hero.

Commandment 3

Have both concentration and diversification work for you. Make a portfolio of 12-20 stocks. Look for different themes. Concentrate in your top

Positions (10-11 stocks) and the other stocks should be like football players who are warming the bench and willing to play as soon as they get on to the pitch to replace any stock (one) who is injured or cannot continue to play.

Why Reading and observing different trends matter.

Time for a thread with a live example that is playing out in front of us! 🎵🎵

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“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.”- Charlie Munger

Charlie Munger who is the partner of Warren Buffett, has over the years explained the importance of creating a latticework of mental models. That is basically combining theory with live practical examples

One of the most interesting mental models he talked about in his books was that of Autocatalysis (lets understand this and how we can apply it to a live example):

"Disney is an amazing example of autocatalysis. They had all those movies in the can.

They owned the copyright. And just as Coke could prosper while refrigeration came, When the video cassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.

Forget the Quant&Algos who entered last week and drove the volumes. For a long-term investor, today's concall was music to the ears. Effectively the intrinsic value expands as we take pains in the short term to grow even better in the long run🐶🐕🎵

Sequent 2.0+ by 2025 🎥🎥

The Q4F22 Earnings season is almost here!

What are the Key things that you need to track in various businesses like Hospitals 🏥, Pharma🩹, Chemicals 🧪 and Music🎵 etc ⤵️⤵️

I will be analysing the companies and the expectations in two ways:-

1⃣What does the company do and the sales split?
2⃣What to expect from the results/Business direction?

1. Divis Labs:

Over the years Divis has proven its capabilities as an API player and has the highest Ebitda margins (44%) when compared to the other Pharma companies. 57% of the business in the last Quarter Q3FY22 was contributed by Synthesis and 43% by Generic API’s.

What to expect?

Molnupiravir has contributed to almost 21% of sales for Divis in FY22 (According to Kotak).
Investors will need to track the recovery in the Generic API division which has been soft for the last 3 quarters and growth in CDMO ex of Molnupiravir.

What to look for in Financials?

Key monitorable to track is by how much the topline grows or degrows QoQ. Given the base was high in last Quarter due to Molnupiravir Sales.

Topline sustaining above 2100 crores and margins above 41% will be good!

Once invested it's your duty to look for Anti Thesis pointers/disconfirming evidence. Don't get caught up in echo chambers. Investing is lonely because of this

Rivian ($0 revenue, -$1.6 billion net income) now has a higher market cap than Starbucks ($29 billion revenue, $4.2 billion net income) and Target ($100 billion revenue, $6.3 billion net income).

$RIVN $SBUX $TGT

Data via @ycharts

1/ @mjmauboussin's book Expectations Investing is a masterclass in valuation & strategy

His framework uses price-implied expectations to assess companies, an elegant way to invert valuation

https://t.co/kESplMN3nW

To practice these concepts, I wrote a case study on Chipotle⤵️

2/ Chipotle is the leading fast casual restaurant chain across the US, with almost 3,000 owned & operated locations

They benefit from strong unit economics and a trusted brand

We'll discuss consensus estimates, competitive landscape, and expected

3/ We must first identify the price-implied expectations based on key value drivers

After finding the consensus estimates, investors can seek opportunities in the expectations - looking for a divergence from the market's assumptions

Let's start with Chipotle's sales growth

4/ Chipotle has grown revenues from $3.9B to $7.55B over the past 5 years, at a 5 year CAGR of 14.1%

Analysts estimate a 13.7% consensus growth rate based on 5-7% same store sales growth, 8% additional store openings per year, and steady digital sales contribution

5/ Next is operating profit margin, which measures profitability from core operations

Chipotle has slowly been growing its margin, now at 10.67%

Analysts expect high margins of 15.75%, with incremental profits from digital orders and unit-level margin growth contributing

A reminder of rule number one from @mjmauboussin

"An Introduction to Valuation" by Aswath Damodaran is an excellent doc for learning more about Valuation, differences between Intrinsic Value (DCF) and Relative Valuations (their basics, Pros/Cons, when they work better...).

cc: @dmuthuk

Some of my fav slides from the presentation.

✔️Misconceptions about and approaches to Valuation.