Test products, look for great products/services at great prices. Look for inspiring leaders, who lead from the front. They attract the best talent, and customers.
Repeating for emphasis: Seek great products, great leaders, great team, high pace of innovation, network effects.
Look at the competitive landscape. Regulatory and political environment.
What are the unknowns?
Consider profitability. What are the estimated future cash flows? How much is that worth today? Compare it to the market price. Consider risk.
Expected Value = Potential Reward X Probability of Success
Calculate Risk Adjusted Returns, and compare investment opportunities. Stay in my circle of competence—I don’t invest in things I don’t know about or understand. Consider the macro-environment, and the direction of interest rates.
Buy over time, dollar cost average into a position to reduce the chance of buying at an unnecessarily high price. For each buy, reaffirm that the information and reasoning is high quality. Same for selling.
I want the average of how smart I am, or above it, not just how smart I was on any given day. I try to make decisions during times of lucid thinking, and re-evaluate past decisions.
The biggest risks/weaknesses: my emotions, limited bandwidth, laziness, forgetfulness, FOMO, distractibility, and cognitive decline.
It’s important to get a lot of high-quality data from multiple perspectives, and periodically analyze investments.
Come up with fair valuation for ____
Assume __% growth rate of revenue/free cash flow/net income. Use ___% as terminal growth rate after year ___
What is a fair valuation for 2025 and 2030
Now consider a scenario with a mild recession in 2025-2026
This is the recent Q4 data. ___ revenue, ___ Net income. Come up with a fair valuation using sum of the parts, do a DCF for each part
What is the present value of Tesla’s Optimus program assuming they deliver __ units in __ year