Investment Philosophy

See also: Valuation Models

Discussion: Forum

Draft

What are principles

Our Investment Philosophy is first principle focused with a strong focus on the questions "Is it true"?

True is something that can be objectively verified like numbers in a well conducted survey. It can also be a "law of nature" like gravity.

We believe that like in physics that there are timeless laws of nature which exists in investing.

By studying historic patterns and continuous hypothesis testing i developed a consistent and logical investment system and created a strong track record.

This investment system is the basis for our investment models.

What are the most important principles of investing

The most important principle to generate excessive returns is "being early". (Ahead of the curve)

Being early means realizing something before most people do. (By law of demand and supply an asset can only be cheap if others don't think it's valuable.)

The sophisticated investor therefore has to realize when conventional wisdom is wrong and cannot be afraid of contrarian bets. (Our current contrarian bet is Meta)

The most important principles to determine the intrinsic value of an asset is understanding markets, moats and teams.

We believe that we live in a time of computer based revolution with unprecedented innovation and unseen margins and scaling opportunities.

We are therefore mainly focusing on disrupting technologies with strong moats and gross margins and outstanding founders/teams at reasonable valuations.

The most important principle of capital protection is "high confidence". (even ahead of diversification)

High confidence means being sure about our investment thesis.

There is no shortcut or workaround to high confidence but detailed and obsessive work. We are striving for an excellent understanding of every major sub-component of the investment thesis w/o loosing oversight.

A high level of confidence allows us to take advantage of falling prices by doubling down(if the situation allows it) and avoiding panic reactions.

A high level of confidence and understanding also allows us to differentiate signal from noice and panic first once real problems evolve.

100% Transparent logic based investment models

We believe investing is no rocket science but deeply logical and can be understood with common sense.

In fact when studying industries, companies, balance sheets we strive to understand the unique situation and are not blindly applying ratios.

When doing hypothesis testing of cause-effect relationships we do look both for strong historical correlations and logical explanations for those correlations.

We explicitly invite you to challenge all our assumptions if they are not logical or inconsistent or you spot any mistake or missing point. We will then take your considerations into account, add good arguments and incorporate them into our models, revisit our assumptions and correlations if needed or simply do at better job of mapping our reasoning and thereby build ever more transparent models.

An investment model can never be perfect but we strive to arrive at an as accurate representation of reality as possible.

By following this community based open source model combined with strict criteria for probability based weighing of correlations and strict due diligence of news sources we are confident that we can improve the accuracy of our investment models over time to unprecedented levels compared with industry standards.

Research process

We are constantly aiming to reduce complexity by dividing a large company analysis into multiple sub-components like team, market and moat. Those components in return get broken down into more sub-components which might be broken down even further until we reach a level at which components and cause-effect relationsships become self explanatory & common sense.

The aim in our analysis is to reach high conviction levels on different parts of an investment thesis which will in the end be synthesized into one complete picture which comes as close to reality as possible.

To do: Add graphical visualization and create deconstructed model for one example company.

Strategy + Time Horizon

to be added

Macroenvironment

to be added

Other

We don't follow any greater fool theory but recognize the prevalence of narrative based investing in speculative and unregulated markets like crypto.

Our focus on truth leads us to establish a meritocratic and non dogmatic discussion based culture.