Did you ever feel a seismic shift in your investing journey?

A true "Aha!" moment when you felt like you were seeing the matrix for the first time?

It happened to me in September 2017, when I listened to @DavidGFool being interviewed by @patrick_oshag.

Thread

David's approach is focused on being:

Business-focused
Extremely long-term minded

His aim is to:

Get in ahead of the rest of the world.
Keep holding well past the rest of the world.

You need to be able to go through heart-wrenching drawdowns through thick and thin.

David is focused on "rule breakers," companies that break the rules of how business is being done.

$TSLA, $NFLX, $AMZN, $SBUX are great examples.

Disruptors of our time.
Innovative leadership.
Large addressable market.
Exceptional product or service.

David presents the following 6 traits of rule breakers:

Top dog and 1st mover in an important emerging industry.

They demonstrate:

Optionality
Infinite possible future

They tend to embrace their own path.

"If you're not the lead husky, the view never changes."

Sustainable advantage.

Rule breakers have competitive advantages (moats) gained through:

Business momentum.
Patent protection.
Visionary leadership.
Inept competitors.

Strong past price appreciation.

"Buy low, sell high" is misguiding.

Most investors focus on the new 52-wk low list rather than the new 52-wk high.

They are too focused on mean reversion and sell too early.

"Winners keep on winning"
in investing, business and life.

Good management and smart backing.

"Character always wins" ~ Henry Cloud.
Culture at the top is essential.

"I have a lover's quarrel with the world" ~ Robert Frost.
Entrepreneurs who try to fix a challenge they face.

Smart backing
Smart people invested early on (VCs).

Strong consumer appeal.

A rule breaker should have a powerful brand.

It can be expressed by:

Pricing power.
Customer loyalty.

Overvalued, according to the Media.

Disruptors of our time will be celebrated by Wall Street and often carry a valuation that is considered outrageous by conventional wisdom.

The "snap test:" If a company disappeared overnight, would anyone care?

What is over/undervalued?

Most valuation techniques are numerical, based on relationships to financial statements.

Many of the important things that determine what wins are not captured on the financials statements:

Leadership.
Culture.
Competitive advantage.
Innovation.

The great edges left to individual investors are:

Being long term.
Using the right side of our brain.

The key is to think beyond the spreadsheet and look for qualitative factors.

Psychologists tell us the pain of loss is 3 times the joy of gain.

In investing, the beauty is that the joy of gain is infinite compared to the pain of loss:

The loss, at its worst, is -100%.
The gain potential is limitless for a multi-bagger.

Regardless of your approach, these 78 minutes are filled with investing wisdom. I cannot recommend it enough.

It's a privilege for me to be a contemporary of @DavidGFool. https://www.joincolossus.com/episodes/36536188/gardner-finding-companies-that-break-the-rules?tab=mentionedcontent