When looking for a business to invest in, you need criterias; a check list of what makes it into your shopping list. It's like choosing your partner. You need a checklist.
Example for men: she gotta be HOT and not evil.
Example for women: Six feet tall, Muscly, toned and athletic, Brown eyes, Short dark hair, Smart dress sense, A beer / lager drinker, Non smoker, Wears smart jeans, shirt and a V-neck jumper, Gets ready in 17 minutes Stylish, Wants a family, Earns $48,000 a year, Loves shopping, Eats meat, Clean shaven, Smooth chest, Watches soaps, Enjoys watching football, Drives an Audi, Educated to degree level, Earns more than you, Jokes around and has a laugh, Sensitive when you are upset, Tells you he loves you only when he means it, Admits it when he looks at other women, Holds a driving license, Can swim, Can ride a bike,Can change a tyre, rings mum regularly.
As you can see, the more criterias you have, the higher chance your thesis will be right.
Below are what I look for in the companies I invest in.
Revenues must be predictable
From strong contract renewal rates to recurring transaction-based revenue and predictable revenues.
Growing free cash flow
Companies to steadily increase their free cash flow and reinvest that cash in new opportunities for strong returns. This is how businesses become compounding machines.
Pricing Power
Warren Buffett says pricing power is the biggest indicator of a company's long-term success. These companies will be able to increase prices systematically or as necessary and not lose customers.
Sustainable Competitive Advantage
Study what companies are doing to keep their competitors at bay. Study to make sure our companies have advantages that won't slip away.
Management
They have to be clear, we need to keep our money with management teams that lay out a clear long-term strategy for success. Consistency too, members of management need to do what they say they will, and when they need to pivot, they should admit it rather than rewriting the past. We want a consistent narrative of events and consistent execution on a clearly outlined plan, even if that plan has to evolve. The management team the right one for the job? We need to believe they're highly capable and trustworthy.
Dependent Customer Base
Company X may have many customers, but if they're not dependent on Company X in particular, they can easily go elsewhere. A dependent customer base suggests a competitive moat and should afford the business pricing power.
Future growth
Basically any way a company could grow, we want to make sure our investments are situated to do so. This also relates to increasing free cash flow with compounding reinvestment possibilities.
Cheers!... Ken
Example for men: she gotta be HOT and not evil.
Example for women: Six feet tall, Muscly, toned and athletic, Brown eyes, Short dark hair, Smart dress sense, A beer / lager drinker, Non smoker, Wears smart jeans, shirt and a V-neck jumper, Gets ready in 17 minutes Stylish, Wants a family, Earns $48,000 a year, Loves shopping, Eats meat, Clean shaven, Smooth chest, Watches soaps, Enjoys watching football, Drives an Audi, Educated to degree level, Earns more than you, Jokes around and has a laugh, Sensitive when you are upset, Tells you he loves you only when he means it, Admits it when he looks at other women, Holds a driving license, Can swim, Can ride a bike,Can change a tyre, rings mum regularly.
As you can see, the more criterias you have, the higher chance your thesis will be right.
Below are what I look for in the companies I invest in.
Revenues must be predictable
From strong contract renewal rates to recurring transaction-based revenue and predictable revenues.
Growing free cash flow
Companies to steadily increase their free cash flow and reinvest that cash in new opportunities for strong returns. This is how businesses become compounding machines.
Pricing Power
Warren Buffett says pricing power is the biggest indicator of a company's long-term success. These companies will be able to increase prices systematically or as necessary and not lose customers.
Sustainable Competitive Advantage
Study what companies are doing to keep their competitors at bay. Study to make sure our companies have advantages that won't slip away.
Management
They have to be clear, we need to keep our money with management teams that lay out a clear long-term strategy for success. Consistency too, members of management need to do what they say they will, and when they need to pivot, they should admit it rather than rewriting the past. We want a consistent narrative of events and consistent execution on a clearly outlined plan, even if that plan has to evolve. The management team the right one for the job? We need to believe they're highly capable and trustworthy.
Dependent Customer Base
Company X may have many customers, but if they're not dependent on Company X in particular, they can easily go elsewhere. A dependent customer base suggests a competitive moat and should afford the business pricing power.
Future growth
Basically any way a company could grow, we want to make sure our investments are situated to do so. This also relates to increasing free cash flow with compounding reinvestment possibilities.
Cheers!... Ken
