Philippe Laffont @plaffont:
1/ How do you build long term performance? Warren buffet is 90. Half of his net worth was accumulated in the first 60 years and another half in the last 10. So stay healthy because the last 10 years matter! But what are the super long term skills every investor needs to master?
Philippe Laffont @plaffont:
2/ I’m a big fan of growth investing over value. Growth is about predicting the future, value is usually about fixing the past. Thinking about the future is more creative and uncertain thus higher payouts if you are right.
Philippe Laffont @plaffont:
3/ Younger/Newer companies are opening up new markets and it’s easy to undersize size the TAM. Is Uber or Lyft replacing taxis or reinventing car ownership?
Philippe Laffont @plaffont:
4/ Time is your friend and leverage is your enemy. A typical growth investment might work for a decade or more so you compound unrealized gains for many years. In value investing, what do you do once the thesis works if there are no secular tailwinds?
Philippe Laffont @plaffont:
5/ Older companies usually take on debt to goose up returns buying shares back and juicing the dividend when growth abates. They invest less in the future and when things change, they can’t react quick enough because they need to maintain their debt ratings and pay dividends.
Philippe Laffont @plaffont:
Fun fact: Only 10pct of s&p companies grow 20pct or more. They have 100B of cash. Meanwhile the other 90pct have 1.8T in net debt. All the growth companies have the cash, the old companies the debt. Good luck competing against the innovators!
Philippe Laffont @plaffont:
6/ To be a growth investor, you need a growth mindset: stay curious and flexible. I try to invest 5-10pct in areas i’m not comfortable in. The corollary is less obvious. It’s hard to sell winners but a portfolio is like a sports team and you need to refresh the superstars.
Philippe Laffont @plaffont:
7/ The best way to get energized about new trends is to meet incredible founders. Many times I can’t understand new technologies but if the founder is so engaged that it feels “magical” then I try to invest anyway. Once money is on the line, the learning always happens faster!
Philippe Laffont @plaffont:
8/ Disclaimer: Growth investing is not momentum investing. The best growth investors find new trends and extraordinary founders but still think of business models and valuation. And they are disciplined risk managers.
Philippe Laffont @plaffont:
9/ When you look at filings of money managers, many own the same stocks but end the year very differently. Why? Not everyone knows what to do when things go wrong. And that’s when major alpha can get created or destroyed.
Philippe Laffont @plaffont:
10/ I used to think it was all stock picking. Truth is, risk mgt is half the battle. Portfolio mgt is like poker, you don’t always get perfect cards and you need to manage your stack. My risk mgt is broken down between rules I never break and principles that reinforce good habits
Philippe Laffont @plaffont:
PS/ Meanwhile here are my two favorite books about growth investing. The first is obvious. The second one is a total gem and maybe my favorite investing book of all time.
Mindset by C. Dweck
Engines that move markets by A. Nairn