Thread by @paraschopra

Investing is made to sound hard but has pretty simple fundamentals.

There are only FOUR things that matter while investing.

(here’s a quick list)

1/ First thing: competence, ethics and credibility of TEAM.

People are important because you can never do 100% due diligence on a business.

If quality of leaders is high, you can rest assured that the business is run transparently and ethically

2/ Second thing: quality of business as measured by ROIC (return on invested capital) and FCF (free cash flow)

Basically if business puts $100 investment, how much is returned back to investors.

Profit margins are a bad proxy stratechi.com/fcf-and-roic/

3/ Third thing: whether the business is future proof as assessed by its MOATS.

A business can have excellent team and financial performance, but if it’s not defensible, in future the business may get eaten away by competitors.

4/ Fourth and last: whether you’re getting the stock a CHEAP price.

Investors are irrational so many good companies can be over priced, which get corrected ultimately.

A good business is a bad investment if price is too high.

5/ That’s all you need to know about what matters during investment.

Everything else (market size, brand name, etc.) is derivative.

Of course, the trick to good returns is being right on these four things.

That’s what good investors get right (either via luck or experience)