[The Weekend Bulletin] #202: Rise & Fall Of Champions, Outperformance of Cyclical Stocks, ...

... Creating Your Luck, Right Way To Go All-In, Foundational Principles, and more.

A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.

Investing Wisdom

• This paper looks at the rise and fall of companies that have dominated the equity markets in the past. It showcases that even the most well run and technologically advanced companies have found it difficult to stay on top for extended periods. It discusses the factors behind the rise and fall of such champions, the average length of time taken by these champions to rise, stay and fall, as well as the state of the current champions.

• This article discusses some interesting findings around cyclical stocks. It asserts that stocks that have a high sensitivity to GDP growth outperform stocks that are relatively stable. It further presents an interesting finding for this cohort based on the size of the stocks.

• This article reflects a recent lunch table discussion. It looks at some high quality companies' performance before and after their stock price peaks. It addresses a common misconception that quality trumps valuations all the time.
  [#199 carried the other side of the argument: valuation is not as important as quality]

Mental Models & Behavioral Biases

• Luck is mostly perceived to be an uncontrollable variable. However, luck exists over a wide spectrum - from completely out of control to somewhat controllable (refer #194 for a few articles on the different types of luck). This article lists a few ways in which you can somewhat control your luck.

Personal Development

• We may all have expertise or skills in different walks of life. However, there are certain skills that are common across all walks of life. The author of this article calls them universal foundations - things we do simply because we are humans. He lists some of his thoughts around these foundations, including emphasising the importance of addressing these foundations holistically and striving for good enough rather than perfection.

• Using the story of NBA star Jaylen Brown, this article proposes the right way to go all-in in pursuing your passion. The author argues that the right way lies somewhere in between being obsessed with the one thing that you are good at and having multiple hobbies. He argues that you need to have multiple rooms in your identity house, with a one or two big passion chambers surrounded by multiple rooms of rest, recovery, hobbies etc.

Blast From The Past

Revisiting articles from a past issue for the benefits of refreshing memory and spaced repetition, as well as for a fresh perspective. Below are articles from 125:

• Nearly two decades after his book 'Common Stocks and Uncommon Profits' released, Phillip Fisher released another lesser known book, 'Conservative Investors Sleep Well'. As the name suggests, the book was about making conservative investments wherein Phil laid down some characteristics of conservative investments. A lot has changed since then (or not!!). Does conservative investing still work in today's fast paced, highly disruptive world? This article analyses long series of data to find the answer. 

  • As a side note, conservative concepts usually find ear only when markets are in a downturn. Now may be a good time to discuss them, but the best times to remember them are during roaring bull markets.

• Here are five simple but powerful questions that every investor should answer before making an investment. Since investing is as much about the state of our mind, as it is about its ability, these questions will ensure that you are in the right state before making a decision. 

• In this short interview, Nobel Laureate Richard Thaler talks about why it is important to learn from history, and why we are incapable of learning from the past.

• The effects of sound on the mind - like that of slow music in soothing the mind, fast and loud beats in increasing adrenaline, etc - are widely known. However, not a lot is talked about the absence of sound - Silence. This long form article discusses the findings of some of the research that has been conducted on the impact of Silence on our brains. Read it for your own benefit.

Quotable Quotes

"Avoiding mistakes is an underrated way to improve. It's easier to fend off a bad day than achieve a perfect day. Rather than do your best, avoid your worst."

- James Clear

”Small risks are overblown because they’re easy to talk about, big risks are discounted and ignored because they seem preposterous before they arrive.”

- Morgan Housel

“Once in Hawaii, I was taken to see a Buddhist temple. In the temple, a man said: ‘I’m going to tell you something that you will never forget.’

And then he said, ‘To every man is given the key to the gates of heaven.The same keys open the gates of hell.’"

- Richard Feynman

* * *

That's it for this weekend folks.

Have a wonderful week ahead!!

- Tejas Gutka

[Jul 06, 2024]