Thread by @RamBhupatiraju

There's always something to worry about in the Market (if you let it).

Positions I bought during 4Q-2018 & Fall 2019 when there were also macro worries about Fed actions, trade wars..

Even with the recent haircuts on many of these, they did more than OK for a 2-3yr timeframe.

Simple Questions I ask during these times.

-Do I like/understand this Company?

-Am I willing to hold for at least 3-5 yrs if things go right/better with this business?

-At these purchase price levels, does it offer a good Risk/Reward with that long-term view?

-Is the Portfolio at risk from Quality perspective or over-weighting (to certain sector or company)?

The train of thought that plays in my head when the Market is worried about the Fed rate increases.

-When rates increase, it'll increase the cost of borrowing for Companies that need debt as a higher % of their Capital structure.

-If those companies are in cyclical or secular decline industries, or competitively weak, that increases their terminal risk even more in addition to the balance sheet risk.

-At some point in the future, rates will come down again. Then what? we rotate back into growth again?

-I would be better off positioned all along the way in (relatively) debt-free, capital light, growth businesses in secular trends run by visionary management teams that are FCF generating (or margins in the right direction). Oh yeah, sprinkle some Moats, optionality on that.

-These companies become even more attractive when they are beaten down by the short-term rate worries.

-Yes, their profitability is further out, but their growth/optionality and the now lower valuation will compensate for much of that.

-Companies that are increasing their competitive positioning & intrinsic value every yr, those are the Co.'s I want to fill my portfolio with. Short term sentiment will be all over the place, but the long-term prices will closely align with the intrinsic value of the business.

-There's no rule that you have to buy the position only once & perfectly time it. Buy slowly at what you think are attractive prices. If you believe this is a good business for the next 5-10 years, there'll be lot of opportunities to add slowly & accumulate a sizeable position.

-Yes, you will have some horrible picks, that's part of the journey. Have proper thesis monitoring mechanisms, take action when needed instead of falling for behavioral biases.

-All of this talk is only good if you truly have a strong stomach for the volatile times, not obligated for consistent short-term overperformance, and can continue holding the good businesses while trimming the weeds over time.

-We all want those huge multi-bagger returns put up by $AAPL $AMZN $NFLX $TSLA $NVDA $ISRG $CRM $CMG $MELI $LULU etc, guess how many rate hike and other macro worries they overcame over the last two decades?

-If you care more about the business, pick the best businesses you can understand, accumulate over time, and monitor the business closely.

-If you care more about the market, understand the major macro factors/indicators and implement the required risk management actions.

Are you trying to slowly build positions in good businesses that you have conviction in and hold them for the long-term?

OR

Are you more focused on constantly buying/selling and capturing short term gains?

There's no wrong answer, It totally depends on each specific investor and their goals. Just make sure you have the right mindset/competence/strategy/stomach for whatever you choose.

Wishing you the best for whatever the Market throws at us in the short-term. 👍

/END