Thread by @Brian_Stoffel_

Six years ago, I read @nntaleb's *Antifragile*. The lessons invaded my brain and haven't left since.

I started taking the ideas and applying to investing.

I created a framework for stock picking from it. It has 8 parts

It has roughly 4X'd the market.

How it works, a 🧵⤵️

Before I tell you those eight, a quick note on what Antifragility is.

According to Taleb, the world can be broken into 3 parts:

*FRAGILE: breaks under pressure
*ROBUST: stays same under pressure
*ANTIFRAGILE: gets stronger under pressure (up to point)

1/

MISSION STATEMENT:

With a good one, a company can respond to chaos and become stronger.

The best ones are:

* Simple: Employees can ask: does this fulfill the mission?

* Optionable: Lots of ways to fulfill it

* Inspirational: Serving higher purpose

My fav: Axon $AAXN

2/

MOAT (most important)

This is the DEFENSE: w/o it, company's business will get stolen

5 varieties:

*Network Effects*

*High Switching-Costs*

*Low-Cost Production*

*Intangible* (Brand, IP, Gov't protection)

*Counter-Positioning*

3/
OPTIONALITY

This is the OFFENSE. W/ it, company has endless opportunities for growth.

Best example: Amazon, $AMZN

Started out selling books,

then Everything Store,

then fulfillment,

then AWS.

There are lots of ways to fulfill this mission

4/

FINANCIAL FORTITUDE

I look at three things:

* Cash & Investments
* Free Cash Flow
* Long-Term Debt

With lots of first two, and not much of third, company gets stronger from chaos:

Can buy back stock, undercut competition, acquire rivals/startups at discount

5/

CONCENTRATION

This is a great fragilizer.

When a company relies on a few customers for the bulk of business, a single decision made in a single board room can change your business's future overnight.

6/

SKIN IN THE GAME

It's always nice to see that insiders own lots of the stock. If they do, they'll feel pain when stock goes down, and joy when it goes up.

Either way, they're in the same boat as you.

7/

SOUL IN THE GAME

When the founder is still involved, it's a big plus for me. Founders often view the company as an extension of themselves.

When that's the case, they're far more likely to think long-term, and not let chaos bother them.

8/

GLASSDOOR.COM

It's not a perfect proxy, but I like to see that employees are motivated and inspired. When they are, they, too, are less likely to fold when times get tough.

This isn't a perfect framework by any means. But what I've found:

* A company can have a low score and still be a GREAT investment.

* I have yet to find a company that scored high and wasn't a great (LONG-TERM) investment.

Some of the highest scorers (not exhaustive) include:

Mercadolibre $MELI
Amazon $AMZN
Shopify $SHOP
Axon $AXON
Alphabet $GOOG/L
Atlassian $TEAM
CrowdStrike $CRWD
Sea Limited $SE
Zoom $ZM
Airbnb $ABNB

There are others

If you enjoy this, consider following @Brian_Stoffel_

I write for The Motley Fool, and often appear on Motley Fool Live

For a template of the framework, you can name the price: gum.co/zWXye

Every Monday, @BrianFeroldi and I take a company through the Antifragile Framework. To see them, subscribe here:

youtube.com/brianferoldiyt

To Summarize the Antifragile Framework:

In uncertain future, the scale tilts in your favor if there's:

1. Great Mission Statement
2. Wide Moat
3. Optionality
4. Financial Fortitude
5. No Concentration
6. Skin in the Game
7. Soul in the Game
8. Solid Glassdoor ratings