What are your Investment Rules?

[kiora]

Do you want to invest in a serial business builder or not?

If you want to view how any company will be doing in 5 years time look at what the CEO says & does
If you want to view how any company will be doing in 20 years time look at how well CEO succession is implemented.


https://www.mckinsey.com/capabilitie...new-businesses

" Serial business builders generate an average of 40 percent greater revenue for each new business they build when compared with first-time new-business builders"

https://www.investopedia.com/ask/ans...tock-price.asp

[kiora]

I only want to invest in companies where all stakeholders are aligned

"How to Create a Stakeholder Strategy"

https://hbr.org/2023/05/how-to-creat...older-strategy

"firms can use data—which is increasingly accessible and rigorous—to craft and implement effective growth strategies that recognize the complex interdependencies among stakeholders, create mutual benefits for them, and increase the net value generated collectively for their constituents"

"All that data was clear: The companies that create the greatest total value across all dimensions of performance don’t do so at the expense of shareholder value"

"the 100 companies on the S&P/Drucker Institute Corporate Effectiveness Index, which consists of S&P 500 firms that are the best at creating value through “excellence in employee engagement and development, customer satisfaction, social responsibility, innovation, and high-quality earnings,” delivered total shareholder returns that were more than 200 basis points higher per year, on average, than those of the S&P 500"

"It stands to reason that such firms are more likely to generate long-term shareholder value than flashier companies rife with burned-out employees and distrustful customers."

"Step 1: Make sense of outside perspectives"

"the importance of integrated value creation for all stakeholders. “One of the things I’ve recognized is that the CEO’s job is to figure out how to harmonize the multiple constituents who are all important,” including investors, customers, employees, partners, and governments"

"Step 2: Create your own stakeholder strategy"
"“We’ve got essentially four things to do in our business: We have to obey the law, we’ve got to take care of our customers, take care of our people, and respect our suppliers. We think if we do those four things, pretty much in that order, that we’re going to do what we have to do in the long term, which is to reward our shareholders"

"The leaders decided to change the firm’s mission statement from “Our goal is to deliver top-quartile financial results by developing industry-leading innovations” to “Our mission is to help health care providers improve the lives of patients by creating a business system that grows long-term value for all our stakeholders.” "

"Step 3: Create systems to sustain your stakeholder strategy."

"Establishing new processes that helped grow stakeholder value. Ward and the CFO asked all business units to begin their quarterly business reviews with descriptions of their value creation trends and targets. They also changed the process for investment proposals. In the past proposals had made only financial forecasts. Now major proposals had to project the impact on stakeholders. If tough trade-offs were necessary, they would be made using the priorities and weights defined by the strategy."
" They changed the company’s investor reports and conferences to highlight stakeholder value successes and began meeting with investment funds that favored stakeholder capitalism. They revised recruiting messages and employee evaluation criteria to stress empathy for patients and fulfillment through collaborative teamwork"
"Companies that create strategies to benefit all stakeholders and establish systems for implementing them build businesses that are more successful and resilient:

[kiora]

Its not rocket science :KISS

Long term, investing in companies providing essential goods & services is hard to beat

https://www.firstsentierinvestors.co...Buddies-EN.pdf

"This combination has yielded consistent profit growth through economic cycles.I felt it was an opportunity to buy a business that is going to be
around for 100 or 200 years, that’s interwoven with the American
economy in a way that, if the American economy prospers, the
business will prosper"
First "many of these assets operate in positive industry structures
with high barriers to entry, a limited number of competitors and
strong pricing power. They operate either as regulated
monopolies (utilities), or in regional oligopolies (freight railways,
waste management and private jet airports). These industry
structures allow rational pricing behaviour and capital discipline
which enables these assets to deliver returns well above cost of
capital and pricing growth at or above inflation over long
time frames."
Second "This stability of demand underpins defensive earnings streams, protecting
profits in downturns and growing them in upturns."
"Third, these companies have exposure to long-term positive
structural growth drivers. Electric utilities are fundamental to the
decarbonization of electricity through investment in carbon free
renewable energy. In Buffett’s own words, “We have got a big
appetite for wind or solar … If someone walks in with a solar
project tomorrow and it takes a billion dollars or three billion
dollars, we’re ready to do it”.(As provided by Longroad) Furthermore, freight railroads and electric utilities are key enablers in the decarbonisation of the
transportation sector while waste management has expansion
opportunities in recycling. This all results in a long pipeline of
infrastructure investment opportunities and underpins long-term
structural earnings growth."

Then use sensible gearing to deliver 15-20 % CAGR,using a simple business structure and can be intergenerationally simple.

Live by
KISS:Keep it simple stupid

There is no need to sit in front of a screen all day gnashing teeth.

[kiora]

""We're as lazy as possible," Elfenbein said. "That's the goal.""
https://finance.yahoo.com/news/finan...230457247.html

[kiora]

One way of doing it
https://www.livewiremarkets.com/wire...erm=10-BAGGERS
"How to spot a 10-bagger (and the next ASX darling that could be headed for the moon)"
"The ASX's next great 10-bagger
According to Prunty, small caps are the best hunting ground for 10-bagger stocks - mostly, because they need the space to grow. Other than being a small cap, there are two other filters that investors should use, being companies with earnings and solid competitive advantages.

"10-baggers are not as speculative as they might first appear," he argues.

"They have identifiable business models. Of the businesses on that list, almost all of them had revenues and earnings - so you didn't need to take a massive leap of faith on the business model."
"So there is some value in the phrase "let your winners run". "

When it comes to competitive advantage - businesses need a "secret sauce" that will help them grow their earnings consistently over long periods of time - whether it be something unique about the business model or its management. "
""It's the leader in their field and it's a massive market. They're already growing their revenues at a rate which, if sustained, will mathematically get them to that 10-bagger status," Prunty says.
Taking the list above as inspiration, Prunty argues that the success of these businesses has been driven by "fundamentals" or earnings performance. So, if investors are assessing whether a busy can become a 10-bagger, they need to ask themselves the following question:

Is this business growing its revenues at a double-digit rate and can it sustain that growth for a very long time?
For a business to be able to sustain this type of growth, it needs a competitive advantage."
""It also needs a big enough market to grow into so you're not running up against growth constraints. The good thing for Life360, in particular, is it has a very significant number of users who are not paying for the service," Prunty explains.

"So there are two levers of growth - one is getting unpaid users to pay and the other one is international expansion beyond North America.""

PS :Note the PE ratio's
If you're looking for "value investments " you're looking in the wrong place

[kiora]

"Residential investment property is a sub-par way to grow your wealth"
https://www.livewiremarkets.com/wire...NDED%20READING
"three major, and often ignored, issues
"Reason 1 is that costs are very rarely considered when talking financial returns."
"Reason 2 - Liquidity
There are several different risks in all types of investments, but one “risk” dominates all “risks” in all investments - it’s the risk of losing value. But there are other risks, many of them in fact. In the world of residential real estate investment, often forgotten are interest rate risk, inflation risk (kind of linked), operating/management risk, Government policy risk, and maybe the dandy of them all, liquidity risk.
"That’s going to be at least 2 months. At least. The point is, real estate transactions take a long time"

"Reason 3 - Yield
In short, the yield is very often very low. Routinely, residential real estate is getting sold for investment purposes sometimes yielding in the 2s, likely in the 3s, rarely in the 4s"

"These three issues aside though, there is one unique benefit to investing in residential real estate that is offered at a level unrivalled by essentially any other asset class.

Leverage"

"if you’re willing to take a similar style of risk you take in property (that is, leverage, although at a much lower LVR mind you), but instead take it in US shares, and if you’re willing to be just as diligent in paying off the debt, your long term return, apples-for-apples, is much better in liquid capital markets than it is in residential real estate.

And you’ve essentially eliminated all liquidity risk"

Note:
Also Australasian shares & FUM not just US shares
Benefited from this buying ahead of markets/a share/a FUM rising in multiple instances using revolving credit or OD that has been secured over property

[kiora]

https://www.livewiremarkets.com/wire...THE%20INSIGHTS

"interesting lessons for us as investors:

1.Quality companies tend to resist reversion to the mean and outperform for longer than expected, and

2.Patience is required to fully reap the benefits of a successful investment thesis. One of the most damaging mistakes investors make is selling winners too early and reinvesting the proceeds into their losers."

"once we have purchased a truly great business that is compounding earnings the best thing we can do as investors is get out of the way and not interrupt this process unnecessarily."

PS Great companies perform continually irrespective of the economy at the time

" We believe the root of this strong performance is an intangible and hard-to-analyse competitive advantage built upon the company’s unique culture. We have seen firsthand that staff love to work in these stores, and customers are unusually loyal."

[kiora]

If in doubt get out at market ASAP

"Stocks that "beat and miss": How they perform today and after the report
With data from the last 16 reporting seasons, we take a closer look at how companies have performed post-results."
https://www.livewiremarkets.com/wire...rm=READ%20MORE
"This is a good indicator but you must instead look at something that has an excellent rate of success. After analysing 7.5 years and 15 actual reporting seasons, it’s far more important to look at what a stock does "on day one of reporting". That is because the market gets it right about 70% of the time via its day one reaction.
So you buy the stocks that are up on day one (or more importantly, don’t sell them after a big move to the upside (shorts will need to cover over the next few weeks). A "beat or "miss" may look like a good guide but more importantly, you sell the stocks that go down on day one - ASAP."

[kiora]

A bit of clip bait but also interesting ideas?
Follow the winners,its a good habit to have.

https://finance.yahoo.com/news/ryan-...223011187.html
"Shortly after the T-Mobile sale was announced, he was on to his next business venture. In an April 2023 Squawk Box interview to discuss his investment in fintech company Nuvei Corp., Reynolds said, "I know nothing about fintech" and “Thank God I am not running the company.” He acknowledged the importance of teamwork behind the scenes and his belief in emotional investing.

“How does this happen if you look at a gin company, a wireless company and Welsh football club? They don’t go together, but they all had strong brand foundations,” he said in the interview. He opts for strong companies that have room to grow in terms of storytelling, which he often reiterates is the key to his marketing success and what makes his approach unique.

Reynolds’ business strategy is both practical and intuitive. He recognizes the importance of personal consumer connections, transforming his investments into more than business ventures. His blend of entertainment skills and entrepreneurial insight creates an effective business model."

[kiora]

The theme resonates with me

"The case for keeping it simple(and how it helped this fundie return 30.8% in 2023) "

https://www.livewiremarkets.com/wire...rm=READ%20MORE

""Most investors, naturally, think all this data and IT will help them invest well," explains Stephen Arnold, the managing director and CIO of Aoris Investment Management.
"Yet, there is no evidence that businesses are more accurately priced in the stock market than they were 30 years ago."

Arnold believes that investors are better placed to keep their processes as simple and "common sense" as possible - make relatively few decisions each year and be aware of the many behavioural biases that come with being human. "

" They must be highly profitable, economically resilient, have breadth across multiple markets, and have been around for a long time. As owners, we will participate in the growth in intrinsic value of these businesses over time.

Then comes the price. If we can own them at some discount to their intrinsic value today, we will benefit from revaluation as share prices converge on fair value."

"Three common characteristics these businesses share are:
They are leaders in their markets and have consistently gained share through time.
They have extremely frugal cultures, which allows them to be both price-competitive and highly profitable.
They are run with a very long-term mindset. They are patient yet ambitious."

"We discover and learn about businesses in multiple ways – reading widely, company visits and using quantitative screens. In the case of Copart, the founder wrote a book on the company’s history called Junk to Gold; I read it and was intrigued."

"We do that through reading their public material and speaking and visiting them. We seek out businesses where management communicates clearly and transparently and wants us to understand them."

"We want to be long-term owners of outstanding businesses. We know the operating environment won’t be easy every year, but the best companies will cope with challenges better than their peers"

"Consistent profitability and strong balance sheets, allowing them to benefit when financially fragile competitors had to pull back on marketing and hiring as interest rates rose."
"The Spirit is the Difference, which spells out their culture and values and what’s expected of people who work there. In a nutshell, it’s all about adding value to its customers. The outcomes are amazing. Cintas keeps its customers on average for 25 years, consistently wins new customers, and grows twice as fast as its peer group."

"“Investing is about judgements, not the quantity of information”"

"We believe we will be successful as investors in a way that is durable if we:

Stay true to our business and investing principles,
Think independently,
Remain comfortable being different, and
Always strive to improve. "