Mental Models
“You've got to have models in your head. And you've got to array your experience—both vicarious and direct—on this latticework of models.” - Charlie Munger
Finding the Right P/E Multiple – Or How to Handicap a Stock
- by Geoff Gannon
First, a huge warning about the tables I’ll be showing you in this memo. The P/E multiples shown here are useful as a theoretical tool for getting some idea of how important durability – being able to know a stock will still be turning an annual profit more than 5 years from now – and…...
Continue readingMore TagReflections on the Newsletter: Why Quan and Geoff Wrote Those 27 Stock Reports
Focused Compounding includes a “Library” with 27 stock reports. I co-wrote those stock reports with Quan Hoang between 2013 and 2016. Although Quan and I no longer work together, he agreed to put his thoughts on that experience in writing for our community members to read. I think reading Quan’s “Reflections” will help you put […]
Continue readingMore TagThe Punch Card Mindset
- by Andrew Kuhn
“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches–representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really […]
Continue readingMore Tag“Go Where There Are Network Effects”
“Go Where There Are Network Effects” – Zero to One book, Peter Thiel A business that has a strong and enduring Network Effect can be a great business to invest in. It is one of my favorite tools in my mental-model toolbox, and is one that I look for and think about often. The best…...
Continue readingMore TagGeoff’s Mental Model #1: “Market Power”
“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” – Warren…...
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