Notes from "Masterclass with Super-Investors"


Psychology

● Your mental capacity has to be higher than your financial capacity to get success in the market.

● DISCIPLINE and PATIENCE are two most important traits to succeed in

the stock market.

● If you buy a share and share price falls, you will regret not having

waited. If you buy and price increases, you will regret not having

bought more. So there will always be regret no matter what you do so

get out this mentality ASAP.

● Courage is very important without which you cannot bet big.

● Once you invest in a stock, investment belongs to the market and when you book profit, it belongs to you. One should not have sentiments for investment that belongs to the market. If you have attachment with the investment, you cannot make big money in the market.

● You should have the ability to Learn, Unlearn and Relearn .

● Don't behave like God once you achieve some level of success. That

will ruin you.

● Don't get married to stocks. Be quick to change your mind when facts

change.

● Always remain focused and don't try to chase fancy by going outside

your circle of competence.

● You will be hit whenever you try to be greedy.

● You should not regret what is already sold (after price rises). If you

have liquidity opportunities will always come.

● You will get any company you want at any valuation you want. You need patience and discipline for it.



Fundamental

● Always think in terms of the SIZE of INDUSTRY .

● Growth and Quality contribute 50% each in stock’s return.

● Market’s favourite combo: High Growth + High RoCE .

● When picking a new stock, look for Growth , RoCE , and Valuation .

● Companies which increase capacities without much dilution of equity and debt i.e. through internal accruals tend to do better in the equity market.

● Read AR constantly to build conviction on your stocks. In absence of the same you will follow what the market says which may/may not be correct.

● PE is a function of Growth and RoE. Even if growth is slowed down, PE will sustain at high levels if incremental cash flows are generated at high RoE.

● Market does not realize the potential of the company if it does not have growth.

● If you buy something that you don't understand, you won't know when to sell it and you will get stuck.



Risk Management

● Risk Management and Position Sizing are two very important traits in investment style.

● You can increase the chance of success by having better Margin of Safety and not making unrealistic assumptions.

● Never use leverage in investing.

● It’s not about right or wrong but it's all about how much money you make when you are right and how much you lose when you are wrong.

● There would always be things that you could not anticipate about the future which could drive the price much higher/lower than you anticipate and while an investor should always be willing to risk a portfolio of his profits, he should protect most of it.

● Write down ideas why you have bought/sold stocks and analyze them after a certain time to make changes in investment strategy.

● Once a portfolio has reached a size, it’s better to grow consistently and protect the capital as much as possible.

● The beauty of this business is there are no clear winners. You have to make a judgement based on a few variables for which you don't have any control on.