1) In his podcast, @GavinSBaker said that the quality/future growth of the business is the single most important factor in investing.
I agree with this 100% - the world-class, disruptive businesses (the rare compounders) generate unbelievable returns over the long run...
I agree with this 100% - the world-class, disruptive businesses (the rare compounders) generate unbelievable returns over the long run...
2) The key lies in identifying such businesses and investing in them with a long-term, owner's mindset.
Obviously, the valuation at the time of investment has an impact on shareholder returns (nice to benefit from business growth + valuation expansion), but if a business...
Obviously, the valuation at the time of investment has an impact on shareholder returns (nice to benefit from business growth + valuation expansion), but if a business...
3)...compounds at 20-30% pa for 10 years, despite valuation compression, shareholders do just fine!
For my part, when evaluating a business, I try and ascertain its revenue/cash flows 5-7 years out (obviously, not a perfect science) and then account for valuation compression...
For my part, when evaluating a business, I try and ascertain its revenue/cash flows 5-7 years out (obviously, not a perfect science) and then account for valuation compression...
4) After applying a reasonable valuation on future revenues/cash flows, I then compare the future market cap with the current market cap and calculate my CAGR - if it is above 15% pa, I invest. Otherwise, I pass.
I appreciate that the above exercise never turns out to be...
I appreciate that the above exercise never turns out to be...
5)...precise and sometimes, my estimates are way off the mark (in both directions) but this is how i do it.
IMHO, the future growth of any given company is the single most important factor which determines long-term investment success.
IMHO, the future growth of any given company is the single most important factor which determines long-term investment success.
