I believe successful investing is about anticipating the anticipation of others. Every investor is trying to express a view of the future. Here are some general principles I try to adhere to in my investment decisions:

• My concentrated portfolio is comprised of high growth companies with large addressable markets. I usually look for dominant businesses with a moat. This can exist in the forms of high barriers to entry for competitors, patents, high switching costs, strong network effects (winner take all being the holy grail), a strong brand name or a strong technological advantage.

• I measure the durability of the competitive advantage partly by analyzing margins over a long period of time in addition to evaluating the components of the competitive advantage qualitatively. This differs from industry / sectors.

• When I invest it is always with the intention of holding indefinitely but the business world is unforgiving and capitalism is brutal; so in reality, my average holding period is a few years.
• I prefer to invest in businesses that are in industries where the pie is growing. This means that the company does not need to execute perfectly to grow – they can grow by maintaining their slice (market share) of the growing pie and sometimes even if their slice of the growing pie shrinks. Often growing pies are driven by secular tailwinds or secular shifts.

• Dividend policy – If a company generates high returns on capital, they should continue to employ that capital back into the business to generate even more return; However if a company generates lower returns on capital or does not have ample opportunities to employ its capital at high returns, then it should return that capital to its shareholders in the form of dividends and share buybacks.

• I keep a long term view and do not let short term swings/price movement impact my long-term investment conviction. I analyze short term movements and try to determine if they are driven by secular changes or cyclical changes – with the latter not swaying my conviction. The psychological aspect of investing plays a very important role here. When prices drop or the market is down, one must maintain conviction and even view such events as a buying opportunity.

• When do i sell? Apart from the below scenarios, I remain invested in the companies and allow them to compound over time.
  • I would “trim” a position when a company becomes extremely overweight in the portfolio ( 30% – 40%).
  • When a company’s rev. growth < 20% pa.
  • When the management deteriorates.
  • When the ‘moat’ has been invaded.
  • When I spot a new opportunity + the cash can get a better return elsewhere.
  • When the company’s debt levels become unsustainable.
  • When there is a significant decline in the company’s competitive advantage.
  • When macroeconomic conditions shift unfavorably, affecting the company’s growth prospects.
  • When there are major regulatory or legal issues impacting the company.