Stefan
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I am passionate about investing. There isn’t a lot which keeps me up and gives me energy like this topic. I realized, only recently, that after a long day, where a lot (and long) meetings keep me grinding on my teeth, I can still open up the spreadsheets and websites and do some investing research. Not that I so it well, or have a specifically stellar track record (should have NEVER sold ANY GOOG stock, but I did), but it gives me joy, some amount of thrill, and is genuinely something I enjoy.
Naturally, I am seeking out podcasts on the topic. So I stumbled over this episode from Invest Like the Best by Patrick O’Shaughnessy featuring Carl Kawaja from Capital Group. Here are my key takeaways:
The value of detail
What becomes very clear is that understanding specifically what the company invested in is doing is key. There should be a high degree of passion to find out exactly how things are being done, and why what is being done is a good investment. Carl keeps repeating that he is passionate about the details, and I can totally relate. This is probably what makes me gravitate toward tech investments, specifically software, specifically SaaS software. This is the field I worked in all my life, one way or another.
Carl calls it ‘the core believe that something is special’ about the investment. It is key to get to this type of thought. Why is the company I am investing in special?
Taking it to the simple basics
Carl reminds us that most assumptions can be (roughly) validated and estimated. Do the calculations around the basic metrics that drive the business (in his example price of raw materials, margins, etc) is often not too complicated. He says that being able to understand basic statements like the changes in theses basic metrics and how they impact the investment.
The ‘one thing’
What is the one thing needed to understand the business? Do I understand this one thing? If not, is there someone who does, and can I let this person go ahead instead? Asking theses questions is key. There is a smart way to find out: be honest when you don’t understand something during a presentation or research.
There is also the ‘good hours’, which are actually minutes: the time when you find something special, i.e. a specific insights. The nice positioning here is that the times when you don’t understand, ask silly questions, are simply times that are needed to get to the ‘extract’, i.e. the ‘good hours’.
Tolerate doing terribly
Carl spoke how making investments into people is always a long term game. Letting people do badly early in their time is key. It has to do with the acceptance that failure will come, and that it is a sign of learning, and that it better comes early where maybe there is less damage done, and learning is maximized.
The Empire Strikes Back
How can existing incumbent companies reinvent themselves? This is a great topic. Target is cited as an example, and I can testify to their success in this. I LOVE to go to Target, and also shop online. Using their existing stores as distribution centers, and a strong online presence to increase outreach to their customers is great.
This ideas is powerful: think of existing ’empires’, and how they could pivot to generate success in a changing world. Zara is another such example. Another example is the electric Hummer. How more an example of pivoting than making the ‘environmental killer car’ into a clean electric car. So true. Disney is also highlighted as a company which is using a successful content strategy to make big headway in a digital world.
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🎙️Find the full podcast episode on Apple podcasts or Spotify.
