@contrarianEPS I don't know about crypto but I invested because it's was rising

- Retail Investor

@patiwatp It’s all excel!

Praj is not just an Ethanol Play. Found this bit to be the best, creating mind map of optionalities requires in-depth understanding and use of knowledge from multiple domains. Hats off @unseenvalue 🙌🙌
https://t.co/XP4SErAZVo

Always read the oldest 10-K you can find on a company

Reading the oldest 10-K will give you added perspective on the business and it'll get you thinking about how the business has changed over time/how it will change in the future

I remember reading in @Prashanth_Krish blog today that an Adani company had the same price in 2019 as that of 2010. Zero returns in 9 years. The one year return is so high that 10 year CAGR now is 30%

If you cannot understand this, long term investing is not for you.

0/ If you’re an SMB operator and want to increase the value of your business, focus on 2 things above all else.

1. EBITDA: how much $ do you make
2. Risk: how reliable is the $ you make

Enough has been written about #1. Here are 5 things you can do to tackle #2:

[THREAD]

1/ All 5 of these tactics are a function of the same guiding principle:

Spend more time working ON the business, not IN the business.

Your job as CEO is to consistently:

- Identify opportunity
- Execute once
- Set process
- Delegate
- Fire yourself

With that said…

2/ Establish your focus

Most SMBs survive in the early days through 1-2 key customers.

If you do a good job, they'll give you more business.

That's the trap.

If it's not in your core focus, resist the urge.

If you don't you'll become a consulting firm for 1 customer.

3/ Eliminate Key Man Risk

SMBs are overly reliant on a small handful of individuals to run the operation.

Implication: Most knowledge about the business sits in the heads of a few people.

Take the time to develop strong Tier 2 management - this creates redundancy in the org

4/ Institute Operating Process

Strong Tier 2 management isn't good enough. You need knowledge to live in docs and systems, not just in brains.

Every dept should have a stand alone playbook.

An easy test: "how quickly can somebody that knows nothing about the dept. plug in?"

There are 2 paths to success:

1. Be Top 1% in the world at 1 thing
2. Be Top 25% in the world at 3 things

Top 25% is achievable by most people.

The problem is most people focus on being Top 1%.

Work on combining “3 pretty goods” and stay at it.

It’ll pay off big.

Peter Lynch's 8 principles for beating the market

(Why listen? He averaged 29% yearly returns running a mutual fund!!!)

1/12

1. Know what you own

This one frequently gets a "yeah, yeah" from me, but it's embarrassing how many "They do THAT?" moments I have.

Here's a test for every company you own...can you explain in detail how they make money AND how that's different than their competitors?

2/12

2. It's futile to predict the economy and interest rates (so don't waste time trying)

As I'm writing this, we're all wondering what the Fed's going to do.

You could read this a week, a month, or 10 years from now, and this would be true.

3/12

3. You have plenty of time to identify and recognize exceptional companies

Lynch mentions $WMT as an example...even way back when he wrote about it, it was a 10-bagger even if you waited 10 years AFTER its IPO.

Today, we can look at $AMZN or $NFLX.

4/12

4. Avoid long shots

LOVE this one.

It's so easy to get enamored with a stock's potential to 10-bag (e.g. hot industry, huge TAM, etc.), but we have to bump that against its chances for success.

5/12

Mega Thread on Personal Finance 101

👇👇👇

Rule of 72 (Double Your Money)
Rule of 114 (Triple)
Rule of 144 (Quadruple)
Rule of 70 (Inflation)
4% Withdrawal Rule
100 - Minus Age Rule
10, 5, 3 Rule
50-30-20 Rule
3X Emergency Rule
40℅ EMI Rule
Life Insurance Rule

♻ Rule of 72

No. of yrs required to double your money at a given rate, U just divide 72 by interest rate
Eg, if U want to know how long it will take to double your money at 8% interest, divide 72 by 8 and get 9 yrs

At 6% rate, it will take 12 yrs
At 9% rate, it will take 8 yrs

📋Rule of 114

No. of years required to triple your money at a given rate, U just divide 114 by interest rate.

For example, if you want to know how long it will take to triple your money at 12% interest, divide 114 by 12 and get 9.5 years

At 6% interest rate, it will take 19yrs

🗒️ Rule of 144

No. of years required to, quadruple your money at a given rate, U just divide 144 by interest rate.

For eg, if U want to know how long it will take to quadruple your money at 12% interest, divide 144 by 12 and get 12 yrs

At a 6% interest rate, it will take 24yrs

🗒️ Rule of 70

Divide 70 by the current inflation rate to know how fast the value of your investment will get reduced to half its present value.

The inflation rate of 7% will reduce the value of your money to half in 10 years.

Doesn't matter what's the market cap is - micro or large, the quality of any business is never unseen. You screen through the last 5-10 years of balance sheet and cash flows and you'd know what can and cannot compound wealth. Narrative alone is useless. Numbers have to match.

Your view of the world and markets can change significantly when you close out your derivative positions and trading/leveraged trades v/s only hold a delivery-based portfolio.

The reason is psychological. The quick gains and losses that leveraged trades bring make you react with the same emotions you do in a regular portfolio at a faster rate. So what a 30% drawdown would make you think on a delivery portfolio ends up happening in days.

Suddenly you will find it easier to believe that negative conspiracy theory-based video or blog post than you would have otherwise.

It is therefore always a good idea to have an investment portfolio outside your trading positions to help you keep perspective of the big picture and ask the right questions.

The trading then is a subset of the big picture. Bull market cycles often go on for years and go through many bouts of hope and fear themselves. But stocks hold out better making higher highs and lows as long as the trend is intact.

@patrick_oshag A DCF doesn't require use of a spreadsheet. It also doesn't require complex assumptions.

Buffett does the DCF in his head. A unit economics analysis is a DCF done bottoms up . LTV/CBCV can also be calculated in someone's head or roughly "eyeballed" based on pattern recognition.

Predicting Inflation is Hard

"The main argument at the moment about inflation is whether it’s finally here to stay from all of the government spending or simply transitory from a quirky pandemic economy."

https://t.co/0CaOOQUYvU

by @awealthofcs

We are all fighting the same battles: Riding a winner deciding if you should hold it. Holding a loser deciding if you should sell it. Sticking with a stock that has gone nowhere for quarters/years questioning your thesis. You aren’t alone. We are all fighting the same battles.

Videocon is in Upper Circuit today. This makes sense because the max amount you can lose is only 7.6 rupees.

Excellent list of "Investing Lessons". Very relevant and useful stuff for individual investors. h/t @FMUndercover

The List 👇

@10kdiver Ah thank you. Yeah so strange! Maybe Twitter just hates me.