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Countless gold nuggets from @MohnishPabrai sharing with @BCCarrollSchool.
Here are my key takeaways!
A thread.
https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rückhand Zeigefinger nach unten" aria-label="Emoji: Rückhand Zeigefinger nach unten"> https://twitter.com/MohnishPabrai/status/1318278694209609733">https://twitter.com/MohnishPa...
Here are my key takeaways!
A thread.
/1 Valuation and price matters. It& #39;s hard for good things to happen when you buy compounders at 50x earnings.
/2 This party we are having right now will end when we go to extreme euphoria.
As long as humans are involved, we will go from extreme overvaluation to extreme undervaluation.
As long as humans are involved, we will go from extreme overvaluation to extreme undervaluation.
/3 Focus on compounders. They come cheap periodically even though they are usually traded at premium valuations.
/4 Mohnish is no longer looking for 50 cent dollar bills. He& #39;s looking for something with long runway.
/5 Number one reason for investment not working out well is leverage.
/6 For valuation, different industries require different yardsticks. Key is getting to the factors that matters.
Do I understand the biz? Do I understand the 2-3 variables that drive the outcome? Is the CEO honed in on the same variables?
Do I understand the biz? Do I understand the 2-3 variables that drive the outcome? Is the CEO honed in on the same variables?
/7 You can have a very happy life without understanding businesses that are too difficult. E.g. Retail, pharma, healthcare
What matters is what you eventually invest in.
What matters is what you eventually invest in.
/8 Recurring Revenue Streams (RRS) is the most important thing for a business.
/9 How to filter for good biz?
-Look at 13-F filings
-Is it within circle of competence?
-Look at 13-F filings
-Is it within circle of competence?
/10 In the best of times, most businesses are very fragile. Car businesses have huge operating leverage and it was tough to identify whether they would survive back in March 2020.
/11 All smart investing are value investing. A high ROE and growth would always be preferred, without paying too much.
/12 Market don& #39;t appreciate the messiness of a biz. Nothing goes up in a straight line.
It& #39;s always good to pay for a biz core earnings while having & #39;options& #39; for free.
It& #39;s always good to pay for a biz core earnings while having & #39;options& #39; for free.
/13 Evaluating moat, what will they look like 20 years from now? There could be a range of outcomes, but the probabilities should skew in their favor.
A great business should be obvious. E.g. Mohnish knows ADP is a great biz even he hasn& #39;t look at the numbers.
A great business should be obvious. E.g. Mohnish knows ADP is a great biz even he hasn& #39;t look at the numbers.
/14 Don& #39;t fall into the mistress trap—you need to completely understand new businesses you are evaluating.
Make switches from your existing portfolio only if they& #39;re really really good businesses.
Make switches from your existing portfolio only if they& #39;re really really good businesses.
/15 Precision of excel models could lead you astray.
Having a robust checklist is more important to ensure that you think through everything.
Having a robust checklist is more important to ensure that you think through everything.
/16 How big your circle of competence is not as important as staying within your circle of competence.
/17 For young graduates, focus on the pursuit of passion. Think about what you want to do and just do it.
It is probably easier to take up an offer from a company.
But if you are unlikely to end up homeless, stretch a little and get uncomfortable.
It is probably easier to take up an offer from a company.
But if you are unlikely to end up homeless, stretch a little and get uncomfortable.
/18 Watch the full video here! https://www.youtube.com/watch?v=ANn907GgLPs&t=836s">https://www.youtube.com/watch...
