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

@nivin27 Kenneth Andrade & all his interviews ever

Let's Understand why Narrative is important in investing and how to create a Thesis that can help you to hold a stock in spite of the market environments

Time for a thread with international and Indian examples, Please retweet so that everyone can benefit 🧵🧵🧵🧵

The world we see and defined is given meaning by the words we choose to use. In short, the world is what we make of it. Something similar applies to creating a thesis before investing in a stock. Your thesis is what makes you hold a stock thick and through in spite of bull/bear

Example 1: Amazon- In May 1997, Amazon became a publically listed business. The target price set by analysts was $18 per share. It finished its first day at $23 per share. (So much for targets). In 1999, in the middle of the tech bubble. Same stock was trading at $100 per share.

Analysts were giving targets of $300 per share. However, after the collapse of the bubble many internet businesses went bust, but Amazon survived in spite of a 78% drop from 1999 highs. As we all know, Price changes perception. Same analysts started claiming it was massively

overpriced and claimed its days were "numbered". By the end of 2002, it was trading at 90times cash flow (so much for multiples to account for future)

An Example of what Tailwinds look like:

Six key learnings from a friend/mentor in investing:-

1. Investing is a game of probabilities and not possibilities.

2. Sizing is the most important decision that you make.

3. Being a generalist and learning from sectoral experts is fun.

4. Identify the key variables

And learn how to probabilistically see how these variables move in the future.

5. Benchmark companies within a sector and then see which one is doing what, it will sooner or later reflect in financials.

6. Network as much as you can. Network is the modern day networth.

Out of 17 stocks that I own, I am allowed to go wrong in 2-3 of them. Not going wrong shows that you are not taking enough risks or operating on the edge. Learning from mistakes is the number 1 way to improve as an investor. An excerpt from the annual letter :)

I have seen plenty of Buffettology on Twitter and in other places over the past few years. Its time to clear the air and understand that there wasn't one but 3 different Warren Buffett's that existed throughout his career 📚📚

Time for a thread: 3 Different Buffett's 🧵🧵🧵

One of the biggest mistakes that you as an investor can make is to forget the basic and the most important mental model an investor can have: Numeracy. Being fluent with numbers and respecting the context in which Buffett made his returns.

At the beginning of his career, let's call this Warren Buffett 1 i.e. Between 1957-1968. This was the time when he was working with small sums of money. He was extremely valuation conscious and guess what. How many stocks did he buy and sell between this period?

In this period, he bought and sold nearly 400 stocks. He bought Geico and sold it within 18months, he bought Marshals wealth at a PE of 3 times and he bought Commonwealth at a PE of 5times and sold it at a 60% gain. His returns were mind-boggling too during this time period

No Wonder he said, “The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers… I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” Look at the performance once

Things I learned from back tests:

1) Value works. It really doesn't matter what the metric is.
2) Bad balance sheets are fine until there's a 2008.
3) Ignoring valuation works until there is a 2000.
4) There isn't a an all-equity portfolio that will resist a 2008/73-74.

I also found a bunch of strategies that delivered 20% CAGR's and at some point had a catastrophic drawdown. Also found strategies that seemed 'safe' with hyper CAGR's like 20%+ that stopped working the moment I invested in them. If it sounds too good to be true, it probably is.

Investing tid bits.

During high

OPTIMISM: Buyers are willing to pay high prices. You should be a PESSIMIST

PESSIMISM: Buyers are unwilling to pay even low prices. You should be an OPTIIMIST