Malhar’s Investing Thoughts

The quest to getting better is all about improvement; the route to improvement is through feedback. Long-term investors like myself often struggle with feedback. It is not until at least 5 years that some meaningful results show up. In the meantime, tracking business performance is the only way to gauge decision quality. How can one close the feedback loops quicker? How can one reflect on decision quality without waiting for 5 to 10 years?

The solution: history. Make history your friend, and you will accelerate your learning curve multi-fold.

Since the past 10 months or so, I have been reading historical annual reports of large wealth-creators. The clarity it has added to my thought process is immense.

Here’s what I mean: I might pick up the 2010 annual report of a Page Industries or Astral or Vinati Organics, etc; occasionally, I might also read reports of Nike from the 1980s, or TSMC from the 1990s, or Monster Beverages in the early 2000s (no holdings in any as on date). I then continue reading and highlighting several years’ worth of reports, and make avid notes with AR snippets on a Word document*. (So far, I am at >20 companies with the Word doc at 63 pages!)

This way, I get a dynamic picture of how a particular company evolved over time: how they added product verticals, expanded capacities, entered new geographies etc. Crucially, one often finds generalisable insights that transcend a particular company or industry. It is also revealing to try and ponder without hindsight bias (not an easy task!), ‘would I have invested if I had the facts available at the time?’

Now, admittedly, this is no substitute for having actually been invested over those years. Reading about the various roadblocks along the way is one thing; experiencing them is quite another. With that caveat, it is remarkable how much one can glean by reading ‘vintage’ annual reports…

*In case anyone wants, my document is at bit.ly/historicalARs. For a sneak peek, below is just one among many remarkable insights: this is from the 2011 annual report of a company whose share price has since grown by over 100x (any guesses?). Please note that this is not investment advice.