Incremental execution

So, welcome to 2022 and all that. Even if you don’t welcome it, time will pass by and incremental years are inevitable (if one continues to live that is). So, you might as well welcome it for the sake of positive energy and all that.

Anyway, too many “10 ways to buy the dip”, “100 books that I read in 2021”, “1001 things I achieved in 2021”, “1 million things you can learn from the 2021-me” twitter threads aside – my personal learning is that I have increasingly found implementation of incremental learnings in investing execution incredibly hard.

  1. Buying on the way-up: For example, one thing that I consciously tried to do (and it makes logical sense in every possible way – you don’t have to read a lot of books for this) is to incrementally buy more as and when the company delivers numbers / business model improves. For the past 10 years, I have always been the “buy at one low price and pray to Mother and Father God that I am right” kind of investor. Early in 2021, I kinda realised that’s the stupidest thing that I probably have done in the last 10 years (and it’s not the praying bit – that still continues – only more types of Gods have been added). Why not continue to average up (in price) when business model / numbers / competitive dynamics keeps getting better over the years? It’s purely logical – and not that I didn’t realise it before. But as an extension of that logical understanding, the logical execution of this logical understanding was missing making my investing style and returns totally illogical.

To correct this illogical fallacy, in 2021, I tried buying on the way up for some of my businesses, but found it incredibly hard – as in, cannot meaningfully add to the position that I already have. I am learning that incremental execution of a very logical thing is very difficult to do – intellectualizing it is very easy and for some, even execution must be very easy. For me, it is proving to be difficult, but baby steps, one step at a time right now.

2. Smaller allocations: I have always been a concentrated investor in the last 10 years (8-12 stocks at most times, with rare exceptions). Obviously, I’d end up with fairly high allocations for most stocks. The logical extension of this philosophy is that – a) how do you know what you bought will actually work b) what happens if an unknown unknown strikes your company and the stock is down 50% in no time and b) there are too many good fish in the sea, so are you stupid? (the short hand abbreviated version of these 3 questions can be – “afaik, r u bsdk”?)

Given we have concluded above that 2021 was the year of learning and incremental execution, I tried allocating smaller portfolio bets (< 5%) to some other long tail companies that I found to be interesting. Results are too early to call, and it’s been a very easy market in 2021 to execute this strategy given the broader market was fairly expensive. However, jury is still out on a) if I’d sell all these smaller portfolio bets first the moment I find a good concentrated bet or would I still continue to hold these smaller portfolio bets and b) if I’d actually do this in the longer term when the markets are not so easy – yet to be seen. Incremental execution on this has been easy for now, but don’t think it’s easy to maintain this as a continued strategy in the long term.

On a more serious note, CNBC is claiming 2022 to be the year of the stock picker’s market in India. Given CNBC is the gold-standard in erudite thought process, I should give full weightage to their statements and continue to do what I have been doing for the past 10 years – “find stocks which will give me returns” – but with execution of the incremental learnings in 2021.

The other goal for 2022 is to learn about NFTs and DAOs and CBDCs and all the fancy financial architecture that is proclaimed to be built that will change the world. Something new needs to be added to my LinkedIn profile – become too stale and old-school these days – and why not claim to be a “leading thinker” of such thoughts nobody actually has comprehended well.

Be well 2022, and stay safe! Wish you all a very happy new year!

Author: kdaaku

An investor trying to learn the intricacies of Value Investing. If Buffett found Graham, I found Prof Sanjay Bakshi.

One thought on “Incremental execution”

  1. Great article again. In 2021 other then ARs, presentation and and anything related to stocks yours article is only thing I read. Thanks

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