Expected long-term cash flows, discounted by the cost of capital—not reported earnings—determine long-term stock prices.

In the short-term, Mr Market is bipolar and very susceptible to stories and what is fashionable.

In investing doing nothing is the ultimate form of sophistication.

Zero Investments in Crypto
No Idea of NFT
Missed Every IPO - Not comfy with Issue Price
No F&O
No Intraday
Zero Debt
No Credit Card

Comfortable Creating Wealth Holding Businesses I Understand. Pleasure of Missing Out.

How Old School Am I? ❤️

#FI

Live tweeting highlights from our discussion with @SamitVartak moderated by @ishmohit1 and the DIA gang. @saket1974 @saketreddy @dadalife369 @cautkarshpandey @vishal_chandi

So let’s begin -

1. Before looking at the valuation of a business, look at the fundamentals first.

On cyclicals -

2. We look for profit power, the ability of the company to control price and gauge profit. This is why we don’t look at cyclicals.

3. With cyclicals, oftentimes the promoters themselves cannot predict pricing and profitability.

On building a portfolio -

1. Reducing the size of your portfolio too much can make it harder to find big winners, the ones that can give up to 40x in 10 years.

2. I look at 15-20 stocks as a balance between not spreading yourself too thin and not takeing too much risk.

On taking away market share -

1. Creating disruptions and innovating with new products allows you to take away market share. Example #APLApollo and the DFT technology.

2. Cash cows don’t deliver outsized returns for an investor. Aggression and innovation is needed.

On themes -

1. It is very difficult to pre-empt a theme before it happens and predict how it will play out. Instead of that, I look for data.

2. Deleveraging and capex is taking place. Companies have become lean in this period.

@Tom_Voltz1 1/

That’s a possibility.

Buffett has this concept of “owner earnings”: how much cash can be safely taken out of a business each year without hurting it?

Take out more than this, and we risk hurting the business’s competitive position, earning power, unit volume, etc.

2/

At the same time, leaving capital in a terrible business is not a great idea either. It’s like throwing good money after bad.

In fact, directing capital away from textiles (a bad business) and into insurance (a better business) is one reason for Berkshire’s success.

/End

“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”

— Warren Buffett