Weekly Insights #38- Reflecting on 2023
Weekly Insights #38- Reflecting on 2023
2023 has been a fulfilling year on all counts with several important milestones.
Strong performance is a given for nearly everyone I guess given the performance of all indices in 2023. For me the highlight was getting my first 10-bagger in Tips Industries; that too in a short span of ~2.5 years of holding.
Long back I read somewhere (most likely in the book 100 Baggers) that the kick of getting 10-20-50-100x returns is very different and once an investor gets a taste of such returns, he will not be satisfied with 1-2x returns.
But I think one must realize that such returns are rare events that require a combination of very low starting valuations, non-linear earnings growth and longevity of holding. Rest of the times, focusing on a framework that can repeatedly throw out 1-2x return stocks is more than sufficient and something that an investor must be content with.
I recently read somewhere about an exercise of comparing one’s actual return for the year with returns that one’s portfolio at the beginning of the year would generate (ie what would be your return if you would have not done anything during the year).
The focus of this exercise is to see if all the decisions that one had made during the year added any additional returns or not.
This exercise is quite intriguing and I think a lot of people will discover something interesting when they do it for themselves. For me my actual returns are 1.4x the return that my starting portfolio would have generated; so luckily all the work done during the year was not wasted.
But even if someone’s returns are lower than their starting portfolio, it does not necessarily indicate that all the decisions that you made during the year were a waste, because 1-year is a very small period and the positive outcome of some of our decisions might reflect in the 2nd year.
Another significant event in 2023 was the launch of The Weekly Insights newsletter. Ever since I started writing; first with my personal substack- Diary of a Private Investor and then with Surge Capital, I always had this thought of sharing my learnings on a regular basis, but I could never figure out the right structure for the same and thus the writings were sporadic.
However, in Feb’23 I was able to figure out a right structure resulting in The Weekly Insights and was able to write 37 posts; and I expect to beat this number in 2024.
The top posts of 2023 which according to me were of significant learnings & reflections were-
Weekly Insights #35- Convenience will Create the Next Big Profit Pools
Weekly Insights #30- How to Learn & Grow in Investing Part-1
Weekly Insights #23- Key Factor That Differentiates Various Tech Platforms
Weekly Insights #14- An Important Learning from Investing Experience in Pharma Stocks
Weekly Insights #5- Tech Start-ups Recent Focus on Profitability & The Investment Setup
The most important learning in 2023 for me has been the need to refine the initial screening & selection of stocks for research.
Over the years I have realized that one of the biggest reasons for missing out on opportunities which I should have ideally looked at and/or invested in, has been due to being distracted with other opportunities which I know are outside my framework and/or I would never invest in; and the relevance of this was so much more in 2023.
In current times, the number of ideas that one encounters every day is huge; every group that one is part of, every market participant that one speaks to and every Twitter handle that one follows, tells you about a new interesting opportunity every day.
And each such seemingly new opportunity causes a distraction wherein one’s time & attention diverts to an extent in looking at that opportunity. Whereas ideally one should focus primarily on opportunities that will fit in one’s framework and thus the need to create a strong filter upfront is increasingly important.
I have come to realize that rather than trying to cover all the opportunities that are there in the market or looking at every opportunity you come across (which to a large extent is impossible), it is better to try an achieve a 100% coverage of the kind of opportunities that suits your framework & competence.
Though such an approach will lead to some missed opportunities on the other side, but it will ensure that the probability of you missing out on opportunities within your framework & circle of competence is reduced drastically.
So, the primary goal for me in 2024 is to refine the process of initial screening to better cover the businesses that fits in my framework and also to add safeguards to avoid distractions from other opportunities.
That’s it for this week, new insight coming up next week. So stayed tuned!