Thread by @sidecarcap

Re-read “100 Baggers” by @chriswmayer and an early theme is to “buy well”.

Investors emphasize valuation which is part, but not all, that buying well entails.

This is what the world was like during my solid buys; for the best buys multiple factors were in play.

2/ Obvious, but the market was down. As a result headlines were pessimistic and investors were focused on macro issues.

The proverbial baby had been thrown out with the bath water.

3/ The business was investing through the income statement, depressing margins.

Investors were losing their patience which created a coiled spring. Once the company’s investments paid off profits grew as did the valuation multiples.

4/ Analysts were downgrading the stock due to “near-term uncertainties” or similar.

I suspect if given truth serum many would have said the company was a good bet, but they caved under pressure and a short time horizon.

5/ The business was experiencing a competitive threat but it was unlikely to be a mortal wound. Management could work through it - this is what they are paid for.

Investors often freak out about issues operators consider the price of doing business.

6/ One of my favorites, improving profitability was masked by revenues that were flat or modestly declining. Once management fixed margins they focused on revenue growth and profits grew substantially.

7/ All-in, buying well usually meant buying during a brief, dense fog.

The companies were not necessarily cheap on traditional metrics (valuation work is a commodity) but were misunderstood.

And by the time the fog cleared the opportunity had passed.

8/ end