When Netflix launched the streaming service it was really just Netflix and Hulu. Hulu chose to take an ad supported model while Netflix went with subscription only. At the time it would have seemed like Hulu might win (although you couldn't invest in it), but there was room for both.
Thanks for the writeup, but you can hindsight any stock and apply this sort of logic.
When Buffet was showing the tens of pages of failed auto builders when the revolution began, im sure they were all focused on customers, identifying new ways to make money, and had some decent capital allocators amongst them.
You can say Ford survived because it did this and that, and has a nice logo.
Still it would have been just a cointoss. At least in Ford's case he was revolutionizing in multiple areas, you could probably see it to some extent, but probably not in the early days.
I'm sure all failed businesses see the world of TAM and opportunity, and give cheeky quotes like the one you mentiones from Reed.
You are not adding to the process of finding the next bagger here, you are conducting a post-survival hindsight pareidolia
I want to add a few points to think about (take that from someone who actually has had a 150 bagger and quite a few multibaggers).
1) In hindsight it is easier to talk about, though I agree it is a useful thing to study the winners. However, a certain percentage of such investments you are talking about is going to fail. Any investor needs to have a plan in terms of portfolio allocation (e.g. maximum initial capital allocation even for high conviction idea).
2) When do you fold in those cases where you were wrong ? What are the criteria (technical, fundamental) ? Are you going to hold those investments into -99% ?
3) It is completely unrealistic IMHO to just hold through a 80% decline in the way you described. A prepared investor could either a) sell early with a small loss because of technical signals and rebuy later or b) buy a lot more when the stock is down (conviction). To do nothing is just stupid. Another angle: I have coached a high networt individual 1:1 around his investment strategies. I can tell you, the average investor gets really really hot under the feet if their big portfolio gets a drawdown of say 30% or so. They will want to cut their investments and sell.
4) At what point do you actually sell ? To sell once you have a 100-bagger is arbitrary and a useless reference point.
Take away: To find a possible multibagger is one thing. In order to actually be able to hold it for a long time, you need three things in addition: Portfolio allocation rules, buying rules (rules to add), and very clear selling rules.
After 10 years of investing, I have started to write thesis on small caps investment, a lot of asymmetry between risk and reward, I also upload writings on other investment related topics that can bring a lot of value in valuation.
I leave here as a comment an investment thesis I have written in case you or any of your subscribers might be interested in it.
Although I’m generally not a fan of comparisons, I’d like to compare Hims & Hers to Netflix in its early days, based on the information available to me at this point.
From today’s perspective, I believe there’s a strong chance that Hims & Hers could follow a similar trajectory — but in the field of medicine and healthcare delivery.
Don't you think there is also survivorship bias?
When Netflix launched the streaming service it was really just Netflix and Hulu. Hulu chose to take an ad supported model while Netflix went with subscription only. At the time it would have seemed like Hulu might win (although you couldn't invest in it), but there was room for both.
Thanks for the writeup, but you can hindsight any stock and apply this sort of logic.
When Buffet was showing the tens of pages of failed auto builders when the revolution began, im sure they were all focused on customers, identifying new ways to make money, and had some decent capital allocators amongst them.
You can say Ford survived because it did this and that, and has a nice logo.
Still it would have been just a cointoss. At least in Ford's case he was revolutionizing in multiple areas, you could probably see it to some extent, but probably not in the early days.
I'm sure all failed businesses see the world of TAM and opportunity, and give cheeky quotes like the one you mentiones from Reed.
You are not adding to the process of finding the next bagger here, you are conducting a post-survival hindsight pareidolia
Thank you for an interesting article.
I want to add a few points to think about (take that from someone who actually has had a 150 bagger and quite a few multibaggers).
1) In hindsight it is easier to talk about, though I agree it is a useful thing to study the winners. However, a certain percentage of such investments you are talking about is going to fail. Any investor needs to have a plan in terms of portfolio allocation (e.g. maximum initial capital allocation even for high conviction idea).
2) When do you fold in those cases where you were wrong ? What are the criteria (technical, fundamental) ? Are you going to hold those investments into -99% ?
3) It is completely unrealistic IMHO to just hold through a 80% decline in the way you described. A prepared investor could either a) sell early with a small loss because of technical signals and rebuy later or b) buy a lot more when the stock is down (conviction). To do nothing is just stupid. Another angle: I have coached a high networt individual 1:1 around his investment strategies. I can tell you, the average investor gets really really hot under the feet if their big portfolio gets a drawdown of say 30% or so. They will want to cut their investments and sell.
4) At what point do you actually sell ? To sell once you have a 100-bagger is arbitrary and a useless reference point.
Take away: To find a possible multibagger is one thing. In order to actually be able to hold it for a long time, you need three things in addition: Portfolio allocation rules, buying rules (rules to add), and very clear selling rules.
Hello!!!,
First of all I really appreciate your work.
After 10 years of investing, I have started to write thesis on small caps investment, a lot of asymmetry between risk and reward, I also upload writings on other investment related topics that can bring a lot of value in valuation.
I leave here as a comment an investment thesis I have written in case you or any of your subscribers might be interested in it.
Thank you very much for your interest
https://open.substack.com/pub/compoundingcapital1/p/ascent-resources-eng-a-company-with?r=30j4er&utm_campaign=post&utm_medium=web
Although I’m generally not a fan of comparisons, I’d like to compare Hims & Hers to Netflix in its early days, based on the information available to me at this point.
From today’s perspective, I believe there’s a strong chance that Hims & Hers could follow a similar trajectory — but in the field of medicine and healthcare delivery.
eXoZymes Inc is the next 100 bagger