Personal thoughts only, not advice. Like investing, reading, frameworks, biz model, industry & competitive analysis. Here to share, learn, not criticize.
Apr 8 • 16 tweets • 3 min read
Analysts should review their research process to see if it is producing good output. Some might prefer a continuous effort or something for team away days. A useful approach is value analysis a concept from lean principles.
It’s about working on the process vs the work itself.
Investors are different, but I generally separate out idea generation from the research process. Research is about idea validation / testing and building conviction.
Research has to be timely and actionable otherwise in competitive public markets the opportunity might be gone.
Mar 25, 2022 • 12 tweets • 2 min read
Excellent 1991 HBR article on learning by Chris Argyris
The dilemma: “…success in the marketplace increasingly depends on learning, yet most people don’t know how to learn…those members of the organization that many assume to be the best at learning are…not very good at it.”
A few highlights for me…
Feb 10, 2022 • 4 tweets • 1 min read
This is a key point for an analyst / PM to learn / fight against:
“People too often do their best work at the start and then get lazy or anchored.”
It’s easy to say, but have to think from first principles every day. It is easy for an analyst to get stuck in the weeds so one…
…way a PM / team can help is by asking good qus. Eg:
- How are you thinking about this new datapoint?
- Why is the co going down this strategic path?
- Are results & strategies of competitors consistent with what mgmt are saying?
- How does this expert view impact our thinking?
Sep 15, 2021 • 11 tweets • 2 min read
Valve’s new employee handbook is a fantastic read. Most companies should aspire to have a document like this which is specific to their own context.
Some ideas that resonated include…
1/ Give people the freedom to innovate: hierarchy helps predictability & control, but when you seek to “recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value.”
Sep 2, 2021 • 9 tweets • 2 min read
Douglas H. Bellemore’s six characteristics for success as aggressive investors…
Source: The Strategic Investor, 1963
Patience
“The aggressive investor should not expect quick results… Success depends, in large measure, on the ability to select undervalued situations not presently recognised by the majority of investors and to wait for expected developments to provide capital gains…”
Apr 9, 2021 • 6 tweets • 1 min read
The foundations of the philosophy of Scout Capital were the investment values of:
1. Quality 2. Misunderstanding 3. Self-knowledge
Key aspects of quality:
- Unit economics
- Returns on capital
- Appropriate leverage
- FCF conversion
- Market share
- Margin resiliency
- Moat
- L-T growth potential
- Management
Why a quality focus? Reduces the frequency of blow ups & these types of biz often have tailwinds.
Mar 5, 2021 • 5 tweets • 2 min read
These are fantastic threads / perspectives for analysts to read - thank you.
It is important to learn the right lessons from both mistakes [commission & ommission] & things that go well. I often find people focus their learning on mistakes & less on the latter or learn the wrong lessons or see patterns that don’t exist
Some thoughts on trying to learn...
1/ Missing out on something with a high optical valuation... the lesson is usually not ‘be willing to pay any price’ or ‘quality at any cost’ it is ‘why were your numbers / expectations too low’, ‘what did you miss about the business’
Jun 18, 2020 • 11 tweets • 2 min read
15 things that I think about when trying not to sell a good L-T idea:
1. Be prepared to give up P&L in the S-T, L-T winners are often volatile
2. Monitor consistency between narrative & fundamentals. Imagine the destination & the key drivers. Use patterns to help navigate
3. Understand why something is persistently mispriced (confidence in a mispricing means you are less likely to sell)
4. Have a well balanced portfolio of great cos, never let a position become so big it owns you / can take you out of the game
May 20, 2020 • 5 tweets • 1 min read
Uniqueness, hard to replicate / imitate is such an important concept...
Helmer: There must be some aspect of the Power conditions which prevents existing & potential competitors, both direct & functional, from engaging in the sort of value-destroying arbitrage Intel experienced with its memory business. This is the duration aspect of Power [7 Powers]
Dec 21, 2019 • 13 tweets • 3 min read
Good analysts don’t just consume a lot of detail in an academic fashion. They build knowledge in a purposeful, strategic way... some of the things they do include:
- Identify critical biz drivers & pressure points / risks
- Weight the most important information correctly
- Understand how management think, what they want & what they are motivated by
- Always benchmark their views to the expectations they believe are discounted in the price
Dec 18, 2019 • 7 tweets • 2 min read
In trying to find L-T winners, I try to think about the following features [non-exhaustive]...you might only realize that these features are present after you own the co & know it better...features are easier to identify in hindsight, but the present often feels more uncertain
1) A company creates value for customers in a way that others find hard to replicate [in particular I have enjoyed reading @bradsling on NZS and whether it would matter to customers if a bomb fell on the company's HQ]
Sep 5, 2019 • 27 tweets • 5 min read
Assessing mgmt isn’t a science & often access is limited. Look for thoughtfulness. Look for people you can tell are not motivated just by money. Is there an entrepreneurial culture? Look for people who think long term. Lots of mgmt teams will say the right stuff, but is it true?
Reading the transcripts, CEO interviews, CEO letters, presentations on YouTube and other company materials, attending a few meetings, studying the company history etc should be enough to start to get a feel for whether you like management or not.
Jul 29, 2019 • 10 tweets • 2 min read
Was just revisiting some writing on LTV / CAC type analysis... I love it how @mjmauboussin was writing on this in detail in 2004: “The Economics of Customer Businesses, December 9, 2004”
This is a timeless piece of work including so many first principles...
“One of the keys to successfully analyzing a business is getting down to the most basic unit of economic analysis. For many consumer-oriented companies, and especially those that rely on a subscription model, the basic unit of analysis is the customer.”
Jul 13, 2019 • 10 tweets • 3 min read
Tweeted a quote from expectationsinvesting.com earlier. Expectations Investing was published in 2003 by @mjmauboussin & Alfred Rappaport. One of my favourite long term frameworks - cuts to the heart of things… some of the key principles with my brief / non-exhaustive thoughts...
1/ “Follow the cash.” – v important for me. Why? Cash means mgmt can reinvest for growth or return cash to investors; this is what drives value/TSR… biz owners care about cash. FCF can be lumpy/non-existent, then need to understand unit economics/IRR of projects (so far as poss)
