Here are my two cents on this framework
Valuation matters a lot and is relative to the business rating we give to the business. Conviction is about my understanding+ how objectively good is the business. For example, GMM Pfaudler is really strong because of being diverse in terms of product and geography, strong cash generation, market leader, high size of opportunity. But buying it at 70 something PE was not suitable.
I would want to change the Conviction rating to Business rating which is very objective in nature.
Moving on, I strongly believe growth should have a very high weightage and around 50% should be growth. Post that, Fundamentals should matter quite a lot. Does the business have High D/E, does it generate enough Cash, does it have a strong ROCE and ROE? all of that is good to understand
Business Quality matters good enough as well. Type of business: Commodity business, value added, tech business etc. The nature of business relative to its industry such as monopoly or oligopoly etc, Cyclicality, type of industry etc Stability is a factor of Business quality, if its too dependent on a few raw materials or gets it sales from one location, exposed to a single supplier etc can lead to huge changes in profits. For example, Sequent scientific suffered due to its exposure to Turkey. Similarly, a business that operates in a commodity business will struggle if prices fluctuate. All of these are characteristics of business quality and at the end lead to stability. This is why FMCGs command a strong multiple because their business quality is strong.
50% after growth should be divided between Business and Fundamentals andindustry position. 20-20-10 for me.
Personally, I dont care about management as I am really not goof at understanding them and an idiot running a company during tailwinds can do better than a genius in headwinds. It should be a function of boolean if the management is shady or something.
Conviction is my understanding of the business. It is impotant because it will decide how I handle myself when a correction or crash occurs.
Valuation
Valuation is relative to business rating. But I think I need time to delve deeper into understanding how to assign valuations. Should it be purely based on growth prospects? obviously not but how much does that matter?
Updated Formula
CR(wBR+ xVR)= stock score
CR is from 0 to 1. 1 being absolute certainty and 0 being a tip
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