How did I Hold for long periods : I truly believe I am part owner of these businesses and people who make the most money are always business owners ( They are concentrated and have very long holding periods). It is the most difficult habit especially when stock prices are not reflecting the business change. For e.g. it was easy holding Bajaj Finance from 2014 to 2018 while Saksoft nothing happened to stock price for over 4 to 5 years and i bought the business with 5 times Free cash flow . I was buying 40 % ROCE business at 1 time Book.
I buy businesses that have some competitive advantage and have ROE over 20 % and then buy them cheap like when no one is buying them and then hold them. One model I use is to think of business as a growing FD (Owner earnings i-e- Free cash flow yield 1/ FCF ). off course you need to know if business cashflows will increase in the Future.
Most people are buying stocks i am buying partnerships with businesses and hence analysis of business and owner ( your partner ) is most important and then buying them cheaply gives you safety that you will not lose your money.
As I invested in Microcaps and small caps 2018 to 2019 was a bigger fall and more difficult for me than Covid fall. COVID-19 I was an experienced investor and bought truckloads of good companies like Persistent, Wonderla Motilal, Saksoft etc.
Bajaj Finance was beginner’s luck but I bought it 15 times Earnings, it was a play on Indian consumer’s spending and it was like FMCG stock for me. It is also my biggest mistake I did not add as it became expensive due to my framework of not paying. Stock is up 33 times and gives me a dividend yield of 15 %.
Look for high ROCE businesses, see their EBITA margins are constant (which means they have some pricing power), and buy them less than 10 times FCF ( FD is 7 % i.e. 15 times FCF). You will not find many ideas but that’s the whole point. Learning about promoters is not easy but you will know over period of time.
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