While having some time away from it all near the seaside, I thought I would share some reflections, lessons and observations from 20’ and my career. For context, I’m a 30 y/o buysider and have been on this side of the fence from day 1. I have learnt some things..1/

from my time participating in the greatest game on earth but still so many mistakes (lessons) to make. So indulge me for some war story ramblings.. I’m most certainly a taker of different views so please reach out here in the wild or in DMs... 2/

Fat tail risk events are always what you don’t see and read about. If we were all aware, expectations would be set and prices would reflect said expectations. h/t @morganhousel for writing a prescient piece on this in Jan & *before* we had any idea about the impact of COV.. 3/

When Winston Churchill famously quipped "never let a good crisis go to waste" post WWII, he was surely referring to the alpha richness inherent in security prices when a once in a lifetime sigma event arrives without any time to prepare. Careers are made and lost in a crisis.. 4/

The delta in price you pay for stuff from day to day when the mkt is spinning 1000 mph is insane. Said prices are unlikely to be seen again. My experience/learnings suggest luck is a significant determinant in the crisis investing equation...5/

Know how to use SS. If you are using their PTs/ratings changes to inform investment decisions, please see me after class. Mgmt. teams use SS as a communication mechanism- if you understand that, calls can be more informal..6/

SS speak to participants across the buyside spectrum- one good way to flesh out facets of bear/bull case...7/

A prominent SS analyst (after a few drinks) confessed this much and told me that he sends their model to IR to see if it “looks good/correct?”. This may not be the norm so apols in advance to any SS reading this. You’re an important part of the ecosystem...8/

If a name ticks all the boxes re business quality, mgmt. team, industry etc, you should want to add some real length to make it count. The true fat pitches are rare and one 1 or 2 can make your career...9/

Conviction and sizing is born from going down the proverbial rabbit hole to intimately understand a business, industry, competitive dynamics. Don’t concentrate just because others are doing it. A concentrated book is great until it is not + esp if you don’t know what you own. 10/

Have instilled a “no coward long” policy in the book. If you don’t have the conviction to start a pos @ 4-5% then you shouldn’t be long. Run a book of 15-20 names and found that works best for us and for what we want to achieve.

I have a tight correlation to levels of excitement and position alpha. If I’m reading a transcript/speaking to mgmt. and start nodding my head like a lunatic, smiling, get tingles, then I know to focus on this idea... 12/

E.g.: When I first met Adyen in early 19’, I wanted to hug them and fly back to LDN as soon as possible to pitch it and get really long... 13/

Another is when I first saw EVO’s incremental margins. I told my analyst to drop everything he was doing and understand what on earth is going on here. FWIW, it is one the most outrageous businesses I have seen.. 14/

Referencing a recent tweet but if you are legitimately scared to buy something and seems totally absurd given what the stock price is telling you, then you are probably getting a good purchase price through a LT lens... 15/

You don’t need to overthink individual theses. Keep it really simple- only a few inputs will matter from time of entry to exit. If you can’t distill a thesis into a few points, you probably shouldn’t be long... 16/

Good example is CHTR. The industry dynamics (HFC vs DSL), secular trend and the way they have packaged up the equity (public LBO) is a no brainer long for next 3-5 years. Please reach out if you are –ve on Cable from here... 17/

Have an open mind about positions and actively challenge *every* single belief about *every* single thing. If you're long thesis is playing out and the mark to mkt share price is following suit, don’t get too long yourself and be dismissive.. 18/

The bear thesis crystallisation might just occur at the worst time. Akin to in football/soccer, teams are often their most vulnerable + frequently concede a goal right after they score... 19/

There is no more evident truism in investing than price drives narrative. You see it all the time and have had to constantly fight the bias. Narrative also drives prices through reflexivity... 20/

Understand that you will get a lot of things wrong. We are one decision and transaction away from eating humble pie. Humility and retrospection is an edge. Period. Having a trade diary helps with turning mistakes into lessons... 21/

Ideas come from everywhere and are random occurrences. Putting on your consumer hat and understanding how the world is changing through your own habits and life is an underrated source of ideas.

If you read/hear an interesting stock pitch from another peer/well known investor, you would be foolish to not do work on it. You don’t make less PnL because it came from someone else- you just need to understand the business and not borrow conviction (h/t @chetanp )... 23/

Focus on and buy a coffee mug with Signal vs Noise. Signal vs Noise. Signal vs Noise. in big capital letters printed all over it. It is increasingly important in a world built for the proliferation of selling noise... 24/

A manger’s most durable competitive advantage and edge is having LPs and an investor base who is willing to be patient when everyone else is being impatient... 25/

You can be the most talented stock picker in history but if your LPs are impatient, then no one will read about your exploits in the mkt. Ofc, easier said than done and they choose you. You don’t generally choose them.. 26/

@BillAckman alluded to this point re being in a good relationship is additive to PnL (see PSH returns since Bill met Neri Oxman :) ) - but it really is true.

Also true, if your significant other vehemently hates TWTR (and would like to short it if she/he knew how to) and the BB app on your phone- because you are constantly on it- then that is a good litmus test for passion... 28/

Re the latter, it is crucial to play this game but it also doesn’t mean you literally need to do it 24/7 to get an info “edge”. If you know where to look, you can be more efficient with your time. Also, enjoy your life and the fruits of your labour...29/

Having a book packed with long duration growth assets is one giant bet on the long end of the curve. Knowing when to play that game and when not to is ofc super important. What does a 100-150bps lift to the long end mean for your fuller/rich names?.. 30/

Is your ev/whatever name trading on rates or more fundamental reasons? Important consideration… are you underwriting enough/more than cons FCF growth to offset base + bear case of multiple contraction headwind to still generate a compelling IRR?.. 31/

If your friends/family outside of the industry start saying how easy this is, objectively try question whether you have drank the kool aid, and if so, maybe time to reduce some length in retail favs and start earmarking your chair for the music will stop. It always does... 32/

You will get your head cut off and/or your loved ones will leave you if you short based on valuation. Need hard vs soft catalyst with timeline of what + how thesis happens mapped out... 33/

Identify and exhaust the bear thesis in any name before initiating. If you can’t disprove the bear thesis, then why are you still long? If the bear thesis is weak and ephemeral why aren’t you longer?.. 34/

@SuperMugatu spoke about this in his great pod with @BillBrewsterSCG. It has helped me a lot in the past and an important part of my process.

If stuff doesn’t make sense to you, a lot of the time you need to think about what others know that you don’t. So good. h/t to @IntrinsicInv... 36/

Creativity--how the world will might look like in 5 yrs, idea gen, sizing/port construction--generates but more importantly scales alpha. Corollary to this point: You can be non-consensus holding consensus names... 37/

Generally terrible at utilising options- not my sport. But do appreciate how the Greeks can all be evil mistresses (theta decay is real and a gut wrenching exercise). Careers have been destroyed playing with dynamite. “If you’re not a magician, don’t practice magic”... 38/

I don’t structure the book with a view on how over or under weight we are to xyz factor. Factor rotations have become increasingly violent (shorter duration) and episodic and usually brought on by macro (a backup along the curve) = not smart enough to pre-empt them... 39/

Of the view in the long run, factor gyrations are irrelevant but do make for fantastic opps to add length to names who get taken down for technical reasons... 40/

Follow on from above tweet, understand mkt structure. We as individual stock pickers who take a view on intrinsic val of an asset are now a rare breed. According to JPM, 90% of trading activity in US is systematic, CTAs, passive = Mrs. Mkt can become unhinged in the ST... 41/

High prospective IRRs are good but the more predictability you can tag to them the better. Seems obvious but expect to pay up for that predictability of free cash stream. Always let your portfolio + “shopping list” names compete based on this... 42/

Use multiples to gauge sentiment & not ascertain prospective IRRs. Knowing the multiple a business will exit at is extremely difficult and frankly impossible to underwrite. (sentiment). BUT i am guilty as the next for at times using this in internal pitches and calls w/ LPs.

News/events can be priced into assets over and over again . The pricing in of information into security prices is a process & not an isolated event. If similar headlines provide incremental “new” news & above/below current expectations, prices need to bake that in... 44/

If a business has operationally improved (margin expansion, throwing off more FCF, rising ROIIC re to cost of cap delta etc.) then naturally it should be more expensive than before when it was a less superior business... 45/

Using fwd multiples to historicals can induce dangerous fiddling with names... 46/

Through a 5-10 year lens, you want to long the digital economy landlords who provide infrastructure to the front end players. They collect their rent every month no matter who wins or loses... 47/

Important post covid as innovation begets widening delta of winners + losers. There are super bright investors (Whale Rock, Coatue, Ballie etc etc.) who have an innate ability to get front end S Curves right and have the utmost respect for them but not for me... 48/

Mgmt. teams really matter. If you know how to find the good ones, your pathway to happiness is easier/less surprises. If you know how to find the great ones, you can sit back, put your feet up and let them operate. BUT you shouldn't interrupt/fiddle with pos.. 49/

Understand how mgmt teams are paid. What is their KPIs? They might be compensated based on ST metrics that is antithetical with increasing value per share. Higher compensation weighting to stock price is generally a good thing but if taken too far can be bad (Mike P VRX)..50/

Some more unorthodox mgmt. teams will leak (through channels) stories (re acquisition, spin off etc.) to see what the knee jerk mkt reaction is ("oh that is then a bad idea") and to see what they can get away with re their shareholder base... 51/

ROIC gets all the fame and is squarely part of the Quality investor’s lexicon but ROIIC is how you get paid and former is largely irrelevant..52/

At the risk of sounding obvious but the best things in life are free and it is the same with free cash and investing. One doesn’t discount earnings or revs or GMV (!) to best approximate value for a good reason. FCF is the bond coupons for equities... 53/

Found expert calls to be super informative and would highly recommend it if possible inside firm. If you want to go deep sea fishing and hear it straight from the horse’s mouth without script language, then expert calls are for you... 56/

I now v infrequently listen to earnings/conf/I days calls live and like to read the transcripts ex post. I go straight to the Q&A. Little gained from listening to prepared remarks if you have read PR. .. 57/

This has been said many times on here (h/t to everyone) but go straight to the source. Read that K, Q, industry publications- if you have questions, those lovely documents will have provide the answers... 58/

As a close friend, who has one of the biggest books at P72 says, the “Notes” section in Euro co’s Annual Reports are where the real golden nuggets hide... 59/

Most public companies are average and I would argue below average. If you want to generate “extra ordinary” returns then why would you be long an ordinary or terrible businesses? Seems counterintuitive.... 60/

@GavinSBaker brought this to my attention (insane return skew) and Ballie has written extensively about this. JPM also has a great paper noting that extreme winners are slim pickings. https://twitter.com/GavinSBaker/status/1193942553999089665?s=20

#Neversell notion that was written about extensively by Nick Train (run your winners!), Munger (Sit on your ass investing) & brought into the public conscious by @JerryCap seems to be largely misunderstood... 62/

I believe it to be a bold ambition upon initiating a name in the book..If a competing idea has a more compelling IRR then it seems a little silly to not indeed recycle some /outright sell the pos. I wonder if #neverbuy an awful business is more PnL accretive than #neversell 63/

If you have sold a name and down the line the name looks interesting again, there is no harm in buying it again despite it being higher than sell price. If the business has improved/your thesis playing out, then why not? As Uncle Terry says, “make $ with old friends.” 64/

Culture is the real capital compounding agent and has longevity as a comp advantage. Surprisingly, seems to me that it is the least spoken about, understood and practiced. WCM have a major focus on this- pay attention... 65/

Companies that are in the business of selling Status + manufacturing supply suppression are ridiculously superior and can make you look v smart. $RACE has generated a >30% IRR since IPO/spin from FCA in 15’. Bernard Arnault is worth $150bn for this reason... 66/

Not breaking news but knowing how to navigate + utilise Fintwit is like getting a superpower. I have easily added a silly amount of points to my investing IQ from following, reading + interacting with investors who are a lot smarter than me and generous with their time... 67/

For eg: reading what the great Dentist ( @BlueToothDDS) tweets and talking over DMs has allowed me to understand how payments (actually) works and who and what is important... 68/

The best thing to do is to start tweeting and participating in fintwit. I was largely passive user until Feb/March this year. Major step change in learning since I became more active.. 69/

Ok, end. GF is shouting "are you on TWTR again" and we are away. Happy holidays to all.

Ok, back to LDN after a long drive & some time to think. So indulge me for some war story ramblings 2.0. No order, just going to fire away.

The adage “The only real loss in fund mgmt. is crystallised loss, everything else is just volatility” is arguably wrong. The mark2mkt might increase the cost of cap thereby causing biz risk = permanent/some loss of capital OR cause your LPs to redeem = forcing hand in loss. 71/

The survivors of industries that have been disrupted can offer as good/better + less hairy IRRs than the disruptors & certainly the biz’s masquerading as disruptors. They have stared death straight in the eye and defeated it. Their new found immortality should be acknowledged 72/

The prediction business is particularly hard esp in end states of structural LT trends. AWS’s 19’ revs were 50% higher than MS’s 22’ forecast made just 6 years prior. Mkt share forecast undershot by 3X. the overall TAM by 10X. They were directionally correct but also so wrong 73/

Out of all the biases to avoid, anchoring bias is the most dangerous. For eg: if you bought XYZ stock @ $50, and it is now $30 and the thesis has been impaired BUT in your mind, it should get back to $50 because it is your cost. That is criminally wrong. Don’t ever anchor 74/

Price targets are hubris, cap alpha and encourage low quality investment decisions. No one knows the true value of anything and especially with a ST timeline of 12-24 months... 75/

Nepotism is the cancer in any firm’s culture and increases probability of performance mediocrity. It is a lose-lose morale outcome for both hired employee and existing employees.. 76/

GAAP accounting hides competitive advantages and causes mispricing. The real value enhancer asset of a business might also not be found on the balance sheet. 77/

You want to be long problem solvers. There is an increasing amount of problems in different industries that need to be solved. Also = high switching costs... 78/

Ask mgmt. teams who they most admire in their industry (or another) and why? Really good idea generation mechanism and you will be surprised how forthcoming they are in a 1x1 setting...79/

Speaking to a SS analyst 1x1/ @ small group lunch where they can talk openly + offer their *actual* view of their names can be fun. Given corp access, you get some juicy mgmt. team anecdotes. You quickly realize “holds” are sell at any price the mkt is offering. 80/

Finding high quality/actual growth businesses in Europe can be v rewarding voyages given the growth/quality scarcity premium. Multiple expansion can act as steroids to your prospective IRR.. 81/

Your best thinking does not happen behind your desk distracted by colleagues, constant barrage of IMs and deep inside a 30 tab excel model. Put your phone down and go for a long walk or exercise... 82/

Just because you have done the work on a co. doesn’t mean you have to invest. Often one becomes wedded + biased to a name bc of the time + effort even if there is a red flag during your research + DD process. Don’t fall in love with names-they probably don’t feel the same way 83/

Discounts (to NAV) are a false sense of comfort that you are buying ABC underlying for x% less. If there is no clear pathway then why are you long vs the underlying? The tracking error/outperformance of underlying might overtime > the discount collapsing 84/

Discounts exist due to complexity of structure (Liberty, Naspers/PRX) and/or mgmt. with apparent penchant for poor cap allocation (Monsieur Bollore). Both are likely structural meaning discount will persist. 85/

Speaking of Bollore. if you every decide to put capital to work there, remember this characterisation.. “Bolloré is the kind of person who walks into a revolving door behind you and emerges in front.” UMG is one of the elite assets globally today but is in an awful wrapper 86/

D(angerous) CF analyses are solely mechanisms to quantify your subjective view about a particular name. If you love the name but cant make the DCF work… well, just tweak that term growth or discount rate by 50bps and voila! 87/

If a thesis sounds too good to be true, then it probably is (Intelsat, SUNE, Wirecard, VRX, Cannabis, 3D printing etc etc etc)... 88/

Don’t put your macro hat on and make a cowboy investment decision based on a view that is likely not yours, likely wrong and will likely change in a week. Macro is a v important component in the stock performance outcome but is based on thousands of ever changing variables 89/

If a company keeps pushing out profitability target, start to question everything they say and find out the actual reason. They might be hiding something and trying to cover it up with generic reasoning 90/

Along similar lines as tweet 78. Co’s that are in the business of creating significant value for customers and only capture a small margin of said value created are forever underestimated 91/

My guilty pleasure is watching the tape and love seeing how things react and price when events occur. Good way to learn mkt internals. This is not to be misunderstood for tech analysis being an instructive exercise in the approximation for the future of security prices 92/

Try stay away from battleground stocks. One person thinks it is worth 10X from here. The other thinks it is a zero = high beta profile. Every headline is an event and playing there is not conducive to high sharpe ratios 93/

There is also a lot of opp cost imbedded in a battleground name. Reacting to every headline and concurrent volatility is distracting and frankly a waste of time 94/

If names that are in various (3m, 6m etc) momo factor indices and outperform the mkt on a momo factor unwind or general mkt sell off = there a real bid in the name/wants higher & likely for a good reason. Start doing the work on it 95/

Names that are boring/no one cares about but perform quarter after quarter--like the hype and focus of sexier names would suggest--are the best kind of investments 96/

Ok, that's it Just realised long this thread is. Well done if you have made it thus far.