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The Importance of Margin of Safety in Investing
The Nifty 50 were a group of premier growth stocks such as Xerox, IBM, Polaroid and Coca Cola that became institutional darlings in the early 1970s. The real returns on these is far negative had you bought during the hype phase in 1972. Unethical managers have a way of siphoning cash from the business so be wary of businesses run for social purposes or they're owned by shady promoters. A man who can steal from you will steal from you.
On today’s episode, Clay continues his review of Gautam Baid’s book, The Joys of Compounding. Today’s episode is part 3 of our review of this incredible book.
Gautam Baid is the Managing Partner and Fund Manager of Stellar Wealth Partners India Fund, a Delaware-based investment partnership which is available to accredited investors in the US. The fund is modeled after the Buffett Partnership fee structure and invests in listed Indian equities with a long-term, fundamental, and value-oriented approach.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
02:15 - How journaling can make us better investors.
07:00 - Why incentives are at the root of all human behavior.
09:22 - How management incentives impact our long-term returns as investors in businesses.
18:15 - Why being directionally right is more important than being precise in assessing the intrinsic value of a business.
25:37 - How maintenance capex impacts the value of a business.
32:14 - Ways in which value investors fall for value traps.
32:45 - Why we as investors should respect the market’s wisdom for pricing stocks.
35:09 - The three most important words of investing.
41:25 - How high-quality businesses enhance our margin of safety.
47:55 - How one commodity investment catapulted Gautam to nearly achieving financial independence.
53:36 - Why Seth Klarman, Peter Lynch, and Joel Greenblatt consider spinoffs to be ripe hunting grounds for investors.
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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