Thread by @InvestiAnalyst

@DennisHong17 grew his fund from $10M+ to $1.5B in about 6-years

He has some incredible returns. I just absorbed lessons about his philosophies.

Here are his 10 most important Investing principles that led to his success:

1/ Find High-Quality Companies w. Ecosystem control:

He focuses on businesses that control/dominate their ecosystem - Consumers, Producer/Suppliers, Employees, & Key partners revolve around the company.

All stakeholders love the company and hence it keeps competitors at bay.

1b/ Quality, Ecosystem control:

Together with the earlier point,

He measures high-quality companies as those businesses that are either asset-light (high margins ideally) or even asset heavy, but have good predictability of their future cash-flow and growth trajectory.

Next:

2/ Vertically Integrated Co's:

He looks to identify businesses that control a major aspect of their supply chain and control at least a major aspect of the distribution of their product (or service)

These businesses always possess a durable competitive advantage. eg $CVNA, $JD

3/ Find Aggregator businesses:

My definition - Investors should identify businesses that have a network model where the company is able to centralize information about a particular offering - and organizes providers around it and sell the services under their own brand. eg $UBER

4/ Two-sided Marketplaces:

Dennis loves Marketplace business models (I loved this one!). It builds on the aggregation b-models.

These businesses possess durable competitive advantage due to their intrinsic network effect, brand, and ability to easily scale. e.g Craigslist.

5/ Cognitive Referent businesses (CAC< LTV):

He believes that businesses that possess 'consumer immediate recall' have a sustainable low Ad cost

This competitive advantage drives down CAC. This enhances sustainable LTV and strong consumer retention.

e.g. $UBER, $ABNB, $DOCU

6/ Identify businesses with High NPS:

High NPS > Low CAC > High LTV

Investors want to find companies that have high NPS (Personally, this is valuable in industries known for poor NPS).

Find companies that consistently delight customers and in turn, consumers love the company.

7/Other Principles:

Amongst the qualities mentioned, He is also looking for businesses

+ Durable unit economics
+ Network Effect flywheel
+ Defensive Competitive advantage
+ Founder Led w. exceptional managerial character
+ That possess or exhibit a wide degree of Optionality

8/ Some Fundamental Investing Principles (a)

He believes in the importance of always being invested.

His studies have shown market timing is not worth the wasted cash.

He holds minimum cash holdings and views cash as a call option on future volatility opportunities.

9/ I-Principles- b

His most important goal- Always strive to maximize return on time & effort spent. You can do it by developing mental models around industries.

Also, be able to reverse engineer your investment process so you can evaluate when you make investing mistakes (!)

10/ I-Principles-c

One of the biggest lessons that had a big impact personally.

He believes in the importance of portfolio concentration and always being invested in only your highest conviction names.

Concentration forces you to set a very high quality bar for your portfolio.

END/My P-Impressions

I think @DennisHong17 is fantastic. An HBS Grad, Founding Partner of Altimeter Cap & Many successes at a young age! Yet he is v. humble about his background.

Happy anniversary in July!

I believe Dennis will be HUGE (my bet!) though he keeps a low profile:)

Learn abt ShawSpring :

1) The Investor Letters: shawspring.com
2) GoodInvesting has good podcasts on him (He was an early public investor in $SE, $CVNA w @HaydenCapital
3) @TenebristGlobal & @investing_city touch briefly: investingcity.org/podcast/episod…

In Summary: Find the following elements in the best businesses/stocks:

1) High-quality companies that control their ecosystem
2) Vertically Integrated businesses
3) Aggregation-like businesses
4) +2-sided Marketplaces are examples
5) Find consumer cognitive referent businesses

Ct'd

6) Find businesses w. high NPS scores
7) Find those w. Network Effect & Optionality
8) Stay mostly invested
9) Focus on optimizing your time & effort in investing!
10) Concentrate your portfolio on your best ideas

I've created a thread to measure those qualitative metrics.

These were personal takeaways that were recorded in my personal investing journal/process.

Thanks for reading and you took one thing from it. Thank you @DennisHong17

I've shared my takeaways - what was yours, let me know.
Thanks x @InvestiAnalyst