10-K Diver Profile picture
I help people understand the fundamentals of finance and investing.
Matthew Mansfield Profile picture DA Profile picture Tough Trader Profile picture Matthew 𝕊t◎tts 🌙 Profile picture Cameron Priest Profile picture 264 added to My Authors
Aug 14 24 tweets 6 min read

For most of us, the path to financial freedom consists of:

(a) SAVING our money diligently, and
(b) INVESTING these savings intelligently.

Here are 4 key ideas to help you understand the interplay between SAVING and INVESTING. 2/

Key Idea 1.

SAVING is (usually) much more under our control than INVESTING.

If we look closely enough, most of us can probably find some expense we can cut. Some fat we can trim.

Or some way to make a little more money.

These are actions we can take to boost our savings.
Aug 7 28 tweets 8 min read

Get a cup of coffee.

In this thread, I'll help you understand how the TIMING of Cash Flows within a business can have a BIG impact on the returns that shareholders get from owning the business. 2/

Imagine a big, highly sought after, university.

There are many departments in this university. They are spread out across a large and lovely campus.

5000 students study in this campus. Many of them stay in dorm rooms. Some of these dorm rooms even have windows.
Jul 22 29 tweets 10 min read

Folks, today is July 22'nd. 22/7. Pi Approximation Day.

We all learned in school that 22/7 is a good approximation for pi.

But who came up with it? And how?

It happened ~2300 years ago. In ancient Greece.

Here's the story: 👇👇 2/

Before getting to pi, we should first understand the meaning of 2 geometry words: "perimeter" and "area".

Take a piece of paper. Draw any closed shape on it.

The "perimeter" of this shape is the *distance* the tip of your pen traveled as it traced out the shape.
Jul 9 24 tweets 6 min read

Get a cup of coffee.

In this thread, I'll walk you through how businesses die.

As Charlie Munger says: All I want to know is where I'm going to die, so I'll never go there.

In that spirit, we want to know how companies typically die, so we never take our portfolios there. 2/

I can think of 5 common ways companies die:

(1) Competition,
(2) Concentration,
(3) Leverage,
(4) Reputational Damage/Fraud, and
(5) Government Intervention.

Let's examine these one by one.
Jun 28 11 tweets 2 min read

Many people use the “Debt to Equity” ratio to tell whether a company has too much debt.

For example, if this ratio is less than 0.5, debt is “manageable”.

But if it’s over 1.5, there’s too much debt. So, the company is best avoided.


Here’s the problem with that. 2/

Debt to Equity treats ALL debt the same way.

$1B that’s due 18 months from now is VERY different from the same $1B due 100 years from now.

But Debt to Equity treats them both the same.
Jun 26 25 tweets 7 min read

Get a cup of coffee.

In this thread, I'll walk you through a probabilistic thought experiment.

This will help you appreciate some key investing concepts:

- SURVIVAL is key,
- we need LONG TERM focus,
- the LUCK vs SKILL conundrum, and
- the CERTAINTY vs UPSIDE trade-off. 2/

Imagine we have 101 stocks in front of us.

Of these, 1 is "Safe". The other 100 are "Risky".

We know which is which.

The Safe stock grows 10% every year. Like clockwork. There's NO uncertainty around it.
Jun 12 21 tweets 5 min read

Get a cup of coffee.

Many of us are grappling with high inflation. We are worried about how inflation is going to impact our portfolios, and our costs of living.

In this thread, I'll walk you through why inflation is so dangerous for businesses and investors. 2/

Imagine we own a chain of coffee shops.

We sell $5M worth of coffee each year.

And each year, we pocket $1M of that $5M as profits.

So, we have:

Annual Revenues = $5M,
Costs = $4M, and therefore
Annual Profits = $1M.
May 27 4 tweets 2 min read

This is hands down my favorite Charlie Munger quote.

As investors, we want to:

- Buy high quality businesses,
- At low prices, and
- Hold them for long periods of time.

Munger argues that *high quality* and *long periods of time* are far more important than *low prices*. 2/4

There’s so much to unpack here!

I hope this helps:
May 22 25 tweets 7 min read

Protecting ourselves from inflation

Over the last few weeks, I've been asking myself:

IF high inflation is here to stay, what are some ways we can insulate ourselves from its impact?

Here are some thoughts:

👇👇👇 2/

For most of us, the path to financial independence consists of 3 steps:

- Earning consistently,
- Saving diligently, and
- Investing intelligently.

High inflation makes all 3 difficult to do.
May 19 7 tweets 4 min read
Folks, I'm delighted to announce that Ali Ladha (@AliTheCFO) and I are launching a course together.

We're calling it BIBO: Business Investor, Business Operator.

Our goal: We want to help people make better financial decisions, by understanding business fundamentals really well. Who This Course Is For

We think anyone who is fascinated by businesses will enjoy this course and learn something from it.

We're tailoring the course to 2 specific target audiences:

1) Small business owners/operators, and
2) New investors.
Apr 13 40 tweets 13 min read

Get a cup of coffee.

In this thread, we'll analyze the "Devil's Card Game".

This is a super useful thought exercise. It can teach us several key concepts in economics, probability, betting, hedging, investor/market psychology, etc. 2/

So, what's the Devil's Card Game?

Here's a description. Please take a moment to read through it -- as it forms the basis for the rest of this thread.

(h/t Professor Henk Tijms, @Hendrikc44)
Apr 3 33 tweets 11 min read

Get a cup of coffee.

In this thread, I'll walk you through Income Statements:

a) What they are,

b) What key things about a business we can learn from them, and

c) Some important caveats we should keep in mind while reading them. 2/

An Income Statement is just a *record* of how much money a business made (or lost) during a particular period of time -- eg, a quarter or a year.

At its core, this is as simple as:

Profits for the period = Revenues - Costs
Mar 29 17 tweets 9 min read

The Founders, written by my friend Jimmy Soni (@jimmyasoni), is one of the best business biographies I've read.

It's the story of PayPal and the early days of the Internet -- featuring @elonmusk, @peterthiel, @DavidSacks, @mlevchin, etc.

Here are 7 nuggets from the book: 👇 2/

Nugget 1: LTV vs CAC

For the un-initiated:

LTV = Life Time Value of a customer, and
CAC = Customer Acquisition Cost.

In their early days, companies may have to spend significant amounts of money to acquire new users/customers.
Mar 26 29 tweets 10 min read

Get a cup of coffee.

In this thread, I'll walk you through the key elements of a Cockroach Portfolio.

As investors, we want our portfolios to produce reasonable returns without major drawdowns.

Here are some key concepts to help you *construct* such portfolios: 👇 2/

Imagine we have a company: ABC, Inc.

ABC's stock trades on the NASDAQ (ticker: $ABC).

Most years, this stock grows 10%, reflecting growing revenues and profits at the company.

But from time to time (say, once every 10 years), there's a big drawdown. The stock crashes 50%.
Mar 20 20 tweets 5 min read

Get a cup of coffee.

In this thread, I'll walk you through the economics of an internet newsletter.

If you want to start your own newsletter (or are just curious about what it takes to run one), this thread will give you some useful pointers. 2/

These days, it seems like everybody has a newsletter to plug.

And with platforms like Substack, Medium, Beehiiv, Revue, Ghost, etc., setting up a newsletter has never been easier.
Mar 6 40 tweets 11 min read

Get a cup of coffee.

In this thread, I'll walk you through the art and science of valuing a company.

The Goal: We want to figure out how much a company is worth -- so we know what's a good price to pay for its shares. 2/

Warren Buffett often says that ALL intelligent investing is value investing.

What exactly is value investing?

Many people think value investing means buying companies at low P/E (Price To Earnings) ratios, or low P/B (Price To Book) ratios, or high dividend yields.
Mar 4 8 tweets 4 min read
Folks, here's our Money Concepts episode with @BrianFeroldi.

Brian shared his investing journey with us. We talked about his new book, and about many investing concepts.

It's ~1.5 hours of audio.

If that's too long, scroll down for some key highlights!

callin.com/link/aLIBdZMoab Highlight #1

Successful investing is not just about buying "cheap" companies.

It's also not just buying high quality companies -- regardless of price.

Both *quality* and *price* matter.

But quality often matters *more*.

Especially in the long run.
Mar 1 10 tweets 5 min read
Folks, here's our Money Concepts episode on the key investing lessons we can learn from Warren Buffett's partnership and shareholder letters.

It's ~1.5 hours of audio.

If that's too long for you, please scroll down for some key highlights!

Link: callin.com/link/rAPSwbkPAK Highlight #1

Want to become a better investor in ~2 months?

Read 1 Buffett letter a day.

Start at 1965. End at 2021. That's 57 letters.

At 1 per day, it's a 2-month project that can dramatically improve our understanding of investing fundamentals.
Mar 1 13 tweets 5 min read
Folks, here's our Money Concepts episode on Value vs Growth -- and why Buffett says Value and Growth are "joined at the hip".

It's ~1 hour, 45 minutes of audio.

If that's too much, please scroll down for the key highlights!

Link: callin.com/link/xIhjVCyqNM As investors, it's key to understand that NOT all growth is "good".

Sometimes, Growth *creates* Value.

Other times, Growth *destroys* Value. This typically happens when Growth comes at the cost of too much *Capital*.
Mar 1 5 tweets 2 min read
Folks, here's our Money Concepts episode on how to understand a Balance Sheet.

It went on for ~1.5 hours.

If that's too long for you, scroll down for the 3 key things we should look for in a Balance Sheet.

Link: callin.com/link/VRrTtXDDwN #1 Thing To Look For In A Balance Sheet

How much in *assets* does a company need to produce $1 worth of *earnings*?
Feb 27 27 tweets 9 min read

Get a cup of coffee.

In this thread, I'll walk you through Recurrence Equations.

This is a beautiful area of math, with many finance/investing applications.

Plus, it can teach us a lot about problem solving in general -- how to simplify problems and solve them efficiently. 2/

The idea for this thread came from a puzzle I posed on Twitter a couple days ago.

It was a fairly simple counting exercise:

If we toss a coin 10 times, there are 2^10 = 1024 possible outcomes. How many of these WON'T contain 2 consecutive Tails?