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Oct 24 • 2 tweets • 2 min read
Walter Schloss returned 15.7% per year over 45years.

He wrote this paper explaining why he invests the way he does.

“Why We Invest The Way We Do” by Walter Schloss

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More from @F_Compounders

Finding Compounders Profile picture
Oct 17
Thread:

Key Takeaways from The Retention Rate Illusion by Patrick J. Wierckx (@SwitchCost )

I would appreciate to hear @d_mccar and @faderp thoughts on this paper.
You wouldn’t expect to be wrong if you thought that a business that retains 95% of its customers is stronger than a business that retains 80% of its customers , but you actually might be.
As subscription based business have gained popularity, companies are increasingly facing the issue of :
-customer loyalty
-customer retention

Customer retention:
-increase CLV
-drives higher productivity
-enables effective innovation
-drives cross selling opportunities
Read 14 tweets
Finding Compounders Profile picture
Oct 15
5 Key Takeaways from Return On Invested Capital: How to calculate ROIC and handle common issues by @mjmauboussin and D.Callahan .

“ This report is about ROIC, a financial metric that can help with assessing whether a company is creating value with its investments.” Image
1. ROIC and Competitive Strategy Analysis

Michael Porter notes that companies gain an advantage by either :
a. Differentiation
- the company can price it’s good/ service at a premium

b. Cost Leadership
-the company can deliver its offering at a
relatively low price.

We can manipulate the ROIC formula to help in our analysis.

NOPAT/ Sales = NOPAT margin
Sales/ IC = Invested Capital Turnover

Companies can attain the same ROIC in different ways.

If the company has a high NOPAT margin , you should focus your … Image
Read 15 tweets
Finding Compounders Profile picture
Sep 25
Let’s dive into Mohnish Pabrai’s ( @MohnishPabrai )Spawner Framework.

Having Spawners in your portfolio can result in above average returns for the investor.

Spawners are companies that continually give rise to related or unrelated businesses. ( eg. Amazon, Baidu, Alphabet) Image
Spawner companies continuously invest and incubate new businesses which have the potential to be massive growth engines in the future.

This will result in many failures, for example Amazon’s Fire phone, thus this requires the company to be able to take failures in strides .
Types of Spawners
1. Adjacent Spawners
-create related businesses

2. Embryonic Spawners
-acquire businesses and nurture them into much larger enterprises

3. Cloned Spawners
- they don’t innovate, they just copy successful products
Read 6 tweets
Finding Compounders Profile picture
Sep 23
Here is a little lesson on Survivorship Bias.

Ever heard of Abraham Wald.

Abraham Wald was a Jewish Hungarian Mathematician who was part of the the Statistical Research Group at Columbia University.
During World War II , American and Allied bomber planes were suffering major casualties. The US Army then went to the Statistical Research Group for help.

The military wanted to armor areas that were concentrated with bullet holes, mainly the wings and the body.
Abraham Wald disagreed with the solution brought forward. He said that even though these areas had high concentrations of damage, the damage was survivable as the planes were still able to return home.

He advised the military to rather focus on areas that seemed to have little
Read 5 tweets
Finding Compounders Profile picture
Sep 22
I have threads on each of the listed investors .

I’ve attached them below if you interested
1. Thomas Russo
2. Guy Spier
Read 6 tweets
Finding Compounders Profile picture
Sep 21
This is Tom Russo of Gardner, Russo & Quinn. He returned 12% annually between 1990 and 2016 for his investors.

He looks for businesses which have two characteristics:
1.Capacity to Reinvest
2.Capacity to Suffer

Let’s dive into those characteristics Image
1. Capacity to Reinvest

For a business to compound its intrinsic value over periods of time, it will need to reinvest its Free Cash Flow back into the business.

This ability to reinvest and grow requires the business to have a vast TAM( Total Addressable Market)
Tom Russo finds that Global Brands possess this characteristic. Brands are able to go into emerging markets. Population growth and increases in consumer disposable income also act in their favor .
Read 5 tweets

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