TIP680: Investing in Exceptional Businesses for the Long Run w/ Dev Kantesaria
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Deep Dive
Why does Dev Kantesaria emphasize predictability in his investment approach?
Predictability is essential because it reduces the risk of losing money. Dev prioritizes businesses with proven industry dynamics and business models that have been successful over decades. He avoids investments that could suffer significant losses, focusing instead on companies where even if assumptions are slightly off, there’s still a margin of safety to ensure profitability.
Why does Dev Kantesaria avoid investing in Big Tech companies?
Dev avoids Big Tech because he believes AI will become commoditized, making it difficult for these companies to monetize their offerings in the long term. While they may perform well in the short term due to AI growth, he sees risks in predicting the winners in a highly competitive and rapidly evolving industry.
What is the significance of pricing power in Dev Kantesaria's investment strategy?
Pricing power is a hallmark of a great business because it allows companies to raise prices above inflation, protecting against economic downturns and increasing profitability. Dev looks for businesses that can consistently raise prices over decades, ensuring long-term compounding of intrinsic value.
Why does Dev Kantesaria continue to invest in US large-cap companies despite higher valuations?
Dev focuses on US large-cap companies because they often dominate their industries, offering strong growth and predictability. He believes the US has the best business models globally, with superior reporting standards, capital allocation practices, and management teams focused on shareholder value creation.
Why does Dev Kantesaria prefer companies that perform share repurchases?
Share repurchases are an efficient way for companies to return capital to shareholders, especially when stock prices are reasonable. Dev prefers businesses that buy back their stock because it enhances shareholder value and prevents companies from making poor acquisition decisions with excess cash.
What are the key traits Dev Kantesaria looks for when hiring investment analysts?
Dev seeks individuals with patience, discipline, and a long-term outlook. He values delayed gratification and emotional intelligence, as these traits are crucial for making unemotional, disciplined investment decisions. He avoids candidates who are drawn to short-term gains or speculative investments.
What is Dev Kantesaria's view on the current market environment and the recent stock market rally?
Dev believes the recent rally is driven by clarity around inflation and interest rates, which have peaked and are expected to decline. He sees a favorable backdrop for equities, particularly those with strong organic growth, as low interest rates make equities more attractive compared to bonds and cash.
Why does Dev Kantesaria focus on monopolies and duopolies in his portfolio?
Monopolies and duopolies often have strong pricing power and limited competition, making them attractive investments. However, Dev notes that not all duopolies are great businesses, as factors like capital intensity, labor issues, and irrational competition can undermine their profitability.
What lessons has Dev Kantesaria learned from owning S&P Global for over 17 years?
Owning S&P Global taught Dev the importance of long-term thinking and conviction during market downturns. Despite cyclicality in the debt ratings business, he focused on the company’s enduring earnings power and compounding potential, which led to significant returns over time.
Why does Dev Kantesaria avoid highly acquisitive companies?
Dev avoids acquisitive companies because they often overpay for acquisitions, face integration risks, and may dilute the quality of their business models. He prefers companies with organic growth and predictable revenue streams, as acquisitions can introduce unnecessary complexity and risk.
- Current market environment and recent stock market rally
- Importance of quality and predictable businesses
- Influence of Warren Buffett's investment approach
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