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Over the long run, any company's stock (market cap) tracks the underlying business' earnings/cash flows.

If you want a 10-bagger, (depending on the valuation at the time of investment) you need to find a business which will grow by approximately 10X or more.

Rest is noise.
Example 1 - $AXP (stock has tracked earnings for 20 years)
Example 2 - $GE (stock has tracked earnings for 20 years)
Example 3 - $TCEHY (stock has tracked earnings for 10 years)
Example 4 - $NTES (stock has tracked earnings for 20 years)
Example 5 - $CERN (stock has tracked earnings for 20 years)
Example 6 - $GOOGL (stock has tracked earnings for 15 years)
Example 7 - $UNP (stock has tracked earnings for 20 years)
Example 8 - $COP (stock has tracked earnings for 20 years)
Example 9 - $JNJ (stock has tracked earnings for 20 years)
Example 10 - $CAT (stock has tracked earnings for 20 years)

I could go on and on but these 10 examples of bellwether companies from different industries drive home the point that over the long run, stocks (market caps) are determined by the operating results!

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More from @saxena_puru see all

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Puru Saxena
@saxena_puru
1) Investment case for Luckin Coffee

Long $LK
2) $LK - Freshly brewed coffee + leading chains to gain share
3) $LK - competitive landscape
Read 10 tweets
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Puru Saxena
@saxena_puru
On high PE ratios or non-profitability of SaaS + other young growth companies -

Most of the hyper-growth companies in my portfolio either have (a) no earnings or (b) they are trading at triple digit PE ratios.

Before dismissing these businesses as potential investments,...
2)...one might want to ascertain why these companies are still unprofitable and more importantly, why is the market willing to own them at such rich valuations.

The reality is that these businesses are currently spending 30-40% of their revenues on Sales & Marketing...
3) ... and they are doing so because they have figured out that the lifetime value of the acquired customers is way higher than the cost of acquisition of such customers.

So, they are spending cash hand over fist (and why not?) to grab as many customers as they possibly can...
Read 10 tweets
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Puru Saxena
@saxena_puru
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...
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...
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...
Read 5 tweets

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Alex Krüger
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Market cap is by definition the aggregate market value of a company, computed by multiplying price times total number of shares *outstanding*.

Monetary base is the sum of currency in circulation and bank reserves held at the central bank.
Crypto market cap does not typically include the total number of coins outstanding. It excludes escrowed coins.

Putting coins in escrow to reduce coins in circulation is a gimmick to temporarily pump the price of a coin.
Escrowed coins are comparable to closely held shares for stocks (if using market cap) or excess reserves for money (if using monetary base).

Want to ignore escrowed coins? Then come up with a new measure. Market cap is a misnomer.
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I shall be live tweeting TIA India 20-20 ideas summit and investing ideas discussed today !
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Indigo with 40+% market share is only player with positive net worth !
Phenomenal growth in domestic passenger traffic for Indian Aviation last 25 years !
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