1. Welcome!

2. Of Owning a Public Business
The Ten Commandments
Of Owning a Public Business
Ravi Sodhi, MSc, LLM, CIM, FCSI

3. Commandment 1: Understand the Business
5 Minute Test
If you can’t understand the business within the first five minutes of learning about it, move on
Do you understand how the business makes:
Revenues
Profits

4. Commandment 2: Choose the right industry
Which industries are least conducive to success?
Commodities
Technology
Airlines
Automobile
Which industries are most conducive to success?
P&C Insurance
Financial Services
Healthcare
Consumer Products

5. Commandment 3: Invest in a stable country
Example: USA Vs. China
Which country has a better business infrastructure?
Which country has a better history of strong financial success?
Which country has a more stable political environment?

6. Commandment 4: Find a company with low CapEx
Companies with low capital expenditures:
Need less resources to maintain or grow revenues
Which company has lower capital expenditures?
Coca Cola Vs. General Motors
Geico Vs. Air Canada
Nike Vs. Apple

7. Commandment 5: Find a company with secular growth
Stay away from companies with cyclical growth
If a company can only go through innovation, move on
If Apple stopped releasing new and innovative products, would it still survive? No.
If Coca Cola stopped innovating, would it still survive? Yes.

8. Commandment 6: Search for a large Moat
Does the company have a stable position in an industry with:
High barriers to entry
Established economies of scale
Valued brand name
Market dominance

9. Commandment 7: Look at the Balance Sheet
Does the company have a strong balance sheet?

10. Commandment 8: Choose the higher market share
Market share of 40% - 20% Rule
More market share means better economies of scale, more pricing freedom, higher reliance on products by customers
100% greater market share typically means 400% increase in relative gross profit margin

11. Commandment 9: Choose the best business model
Geico
Johnson & Johnson
General Motors
Berkshire Hathaway: Solar government subsidies

12. Commandment 10: Buy at a reasonable price and hold forever
Achieve compounded growth
Think of investing in a company like investing in a life-long partner (marriage)

13. View Every New Investment As a Marriage
Forever...
Buying and selling an investment = transaction costs, reinvestment risks, capital gain tax, accounting expenses
It comes in a package
You can’t have all the growth with no volatility
Don’t try to change the innate behaviour
Keep expectations low

14. Questions

15. Thank You!