Rudra’s PF and Information attic

[Prdnt_investor]

@sahil_vi

Must haves in process

1. (Graham) Low Starting valuations in absolute i need to think company is undervalued. As we all know valuation is very subjective. Valuation comes after business understanding not before. I cannot value that, which i dont understand.
2. (PEAD) Catalyst in next 6-12 months. This is key to get high XIRR. I dont want to buy & wait for 4 years to make returns.
3. (Munger) High & Durable ROCE/Moats: Business is a competition for profits. It is extremely important for us to understand the durable competitive advantages of the business. We as investors, need to anticipate whether our business can withstand attacks on durable moats before they happen. Understanding what are the unique capabilities & value addition activities done by the business is key to understanding why high ROCE is sustainable
4. (Drukenmiller) Ability to take decisions with partial information, specially in environments where markets are stretched, it is important to pull trigger first, with say, only 70% thesis formed, and to be willing to change my mind & sell if i learn facts which are enough to weaken the thesis. Necessarily in such a style churn is high.
5. (@sharemarketgen_) Unwillingness to take a business drawdown. If i see slowdown in business, then i must sell regardless of how much i like the underlying business & its competitive advantages.

Great post from @sahil_vi on the must-have tenets for each investment candidate.

While this is good for someone in the capital building phase to be more aggressive, the approach (especially Points 4. and 5.) changes a bit towards capital preservation with a larger corpus.

In the case of large investments, when one is comfortable knowing the business and management over time, a few quarters of underperformance don’t matter as long as the broader compounding theme and long-term high ROCE are intact.