The Tortoise Speaks...

A blog which periodically revisits evergreen investment principles!

Investing with Conviction @ FLAME University

I got another chance to present on a very abstract topic which I have personally found very hard to articulate. It was thanks to (@NeerajMarathe) Neeraj Marathe’s four day course at FLAME University. FLAME Investment Lab provides a very unique learning platform for professionals.

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Tweaks to our investing framework

The headline first.

There is no change to the basics of our investing approach.”

Our investing approach consists of

  • Investing only with Promoters / Managers who have the best interests of shareholders at heart and who are competent in the business that they run.
  • Investing in businesses where the underlying characteristics are good. These are, limited competition and pricing power which ultimately is shown by high return on capital employed.
  • Limited use of leverage in the non banking / financial businesses we own.
  • A good potential for growing the business is usually a positive provided it can be done in a capital efficient manner.
  • Buying at attractive valuations.

Investors who do not care for the nuances may ignore this post completely.

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Do companies get the shareholders they deserve?

Traditional Textbook Economics has the point of view of maximising utility. It means that each individual’s action in the economy is based on the expectation that they will make the maximum possible gain from a transaction. Whereas, behavioural economics has taught us, painfully, that we may not always be doing this well. We may set out with the best intentions of maximum gain but many times our actions fall short of the goal.

It is not the final action, but the motivation underlying the action, that decides what is or is not viewed as cooperative or fair behaviour.
– Games Indians Play by V Raghunathan

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Data Habits for the Digital Minimalist

What do we know so far…

  • Every single piece of information is a data point.
  • Very few data points are privileged to become an actionable data point, something that can be used to make a decision.
  • What happens to the remaining data points? They either get accumulated in a large heap of some trend or are ruthlessly forgotten by us for not being relevant.

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Fiction Therapy for Investors

There are many benefits of reading fiction.  Most of the productivity blogs / investing blogs I have read don’t offer much advice on how (or even why) to accommodate fiction in our lives. Apart from its entertainment value, fiction can be an effective tool to train our mind.

The future of a company, which we investors imagine today, is based on yesterday’s facts. It is in essence a matter of fiction. That’s what good fiction does. It provides us with a relationship between the facts. The narrative is just for us to absorb the trend a little better.

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