Investing

Personal Investing (ie. Not public)

Instead of being enticed by his passion for creating the Segway, the early investors should have assessed his passion for building a company and bringing the product successfully to market.

If we want to forecast whether the originators of a novel idea will make it successful, we need to look beyond the enthusiasm they express about their ideas and focus on the enthusiasm for execution that they reveal through their actions.

  • Look for companies with high customer LTV (lifetime value).
    • Amazon, Facebook, Google, Netflix etc.
  • This means the company can spend a lot of money to acquire just one customer.
    • So, if you, as a business, have the same target group as someone else with a higher LTV, you are doomed (longterm), as the cost of doing marketing (which is nothing else than buying peoples attention, which is a limited resource), gets higher over time, until you can't effort it anymore.

Drivers of Revenue Generating Potential

  • LTV: What is the average revenue (or profit) per customer?
  • CAC: What are your customer acquisition costs?
    • correlated with brand awareness
    • more personalized ads lead to lower CAC
  • Scalability: How do LTV and CAC change with increasing customer numbers?
  • Amortisation time: How long does it take until a marketing investment turns into revenue?
  • Data access: Do you have access to user data, which allows you to a) derive sales potential and b) personalize products?

The number 1 enemy of leverage is volatility

Consider judging the performance of your portfolio not on how much money you earned as a percentage, but other factors

  • such as the underlying earnings of each company. Has it improved year-over-year? Have their allocation of capital become more efficient? Are their margins increasing?

E Resources

Explore how the length of an investing period impacted annual returns from 1928 to 2014

UE Resources


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