Sunday, 3 December 2017

Session at MDI- Corrigendum


A reader pointed out that the order of 5 steps in presentation and the internship note was different. In the presentation, the downside risks come before management while in the internship note, I have mentioned management before downside risks.

Thank you for pointing out. I uploaded an internship note which was written earlier. Sorry.

While thinking about the process over a period of time, I realized that the process would be more robust if I evaluate downside risks before I evaluate the management.

Revised internship note : Link

Saturday, 2 December 2017

Session at MDI


I had the privilege to speak at Bakshi Sir's class yesterday.
It was a quite an interactive session with the upcoming batch of value investors.

Please find the abridged presentation :   Link
Also, in conjunction find a note on the framework which I share with every batch of interns. It explains the same concepts as in the presentation:  Link

Saturday, 2 September 2017

The Art of Adding Weights
















I strongly believe that adding weights at the appropriate places is the most important element in our lives, and more so in investing.

"Adding weights" means that in anything that we think about , there are always a few factors which carry most of the freight. If we are thinking about risks, there would be a few risks that would determine the beauty or lack of it in a business. If we think about opportunity size or tailwinds, again there would be a few factors which would determine which way the scale tilts. And the same goes with position sizing in the portfolio: a few positions where the investor has the strongest conviction (with minimal risk) will determine if the returns are better than average. I think the concept of adding weights is universally applicable in whichever field we operate or whatever decision we think about.

This is nothing new. It is just Pareto's principle described from a different view-point.

Our job as an investor is to carefully determine which factors should carry the maximum weight. Adding weights without careful consideration can make sure that the disadvantages also get out sized.  Looking at a good business but getting stuck with manager remuneration which is a few percentage points higher than average is a classic case of adding weight on the wrong side, in my view.

Like the game of fruit ninja, we should develop the art of quickly slicing away the factors which are benign or non-core. And then spend a large amount of time, attention and thinking power on factors that are the heaviest.