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Friday 7 October 2022



Multidisciplinary learning is one of the best ways to improve our investment acumen. Here is a summary of some of the best learnings of the week. If you like this collection, consider forwarding it to someone who you think will appreciate it.
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Narrative becomes important in the absence of earnings
In speculative periods when stock prices soar, investors frequently ignore the underlying earnings, balance sheets, etc. of stocks they own. Instead, recent price momentum dictates investors’ buy/sell decisions. Thus, a rising stock price alone is often enough justification to warrant buying shares.
One advantage that these unprofitable companies arguably have is that without existing profits, it’s impossible to compare the practicality of future profit projections.
In Simple Principles of Investment, published in 1919, the author joked: “If there is nothing to compare, there is nothing to criticize.”
Consequently, companies in this camp have more “gray area” to stir up enthusiasm, as it’s harder to disprove the feasibility of their narratives and projections. As a result, without actual profits, the company narrative becomes increasingly important for attracting capital.
It's Supposed To Be Hard
Every investor knows, or should know, the truth about money management: More than 80% of professional investors underperform their benchmark (more depending on how you calculate it). Those stats are used in an often cynical way to show how the industry is broken, crowded, and ineffective.
But wouldn’t it be weirder if it were different?
Wouldn’t it be strange if every slightly ambitious investor could pick a few stocks and earn returns capable of generating dynastic wealth with other people’s money? Or even most of them? How and why could that world possibly exist? The reason Warren Buffett is interesting is because there’s only one of him.
The thing to keep in mind is that in any endeavor that has the potential to deliver big rewards, the best you can do is put the odds of success in your favor, which means recognizing that if you make 100 attempts at something, 99 of them might be failures but one might be an enormous win.
Psychological investing
If your horizon stretches ten years or more, then owning a good business is one of the safest places to be. Even better: own a portfolio of such businesses. Thank goodness we have public equity markets, where we can easily buy pieces of some of the best businesses on the planet. 
What makes investing hard is that things don’t unfold in an even, or predictable, manner. There are some great runs, there are nasty drawdowns and there are extended periods where you seem to go nowhere. Each presents lots of opportunities for investors to make costly mistakes.
You can lower the risks of making mistakes, too, by severely limiting the kinds of businesses you own in the first place. Investors usually focus on trying to find ideas that will perform, or perhaps where they feel they won’t lose money. But I will suggest another, less appreciated angle: think about the psychology involved in owning the name.
We have to admit part of investing is psychological - maybe the most important part. And we know the market will test us along the way. So, we have to look for businesses we would be comfortable holding even during bad times.
Quote of the Week:
“Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand— you must learn to handle mistakes and new facts that change the odds.”
~Charlie Munger
Audio/Video of the Week: How to Time the Market
🔴 How to Time the Market (w/ Milton Berg)
🔴 How to Time the Market (w/ Milton Berg)
Quiver smallcase https://publisher.smallcase.com/smallcase/INSMO_0005 has been performing well since its inception with a CAGR of 25.78%. It has been able to outperform consistently over the entire duration.
CAGR of 25.78%
CAGR of 25.78%
Consistent Outperformance
Consistent Outperformance

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