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Value Investing Framework (part 1) - Curreen Capital - YouTube
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the main thing I'm looking for anywhere
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when it comes to investing is I want to
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go somewhere where I can improve my odds
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so I'm gonna try to go to as many places
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where I can improve my odds that's the
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the broad framework in terms of what I'm
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looking for specifically the investment
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philosophy that has worked best for me
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that makes sense to me that I am capable
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of executing is to look for three things
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I'm looking for a great business with a
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great management team and I wanted it a
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great price this is my good quality at a
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good price framework and that's what I'm
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looking for in any stock and I think
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that this gives me better odds because a
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great business becomes worth more over
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time a great management team will make a
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great business worth even more over time
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and if you buy it at a great price you
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have more a higher probability of having
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it go up on you so in each of these ways
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I'm trying to get better odds so the
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problem with trying to get a great
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business with great management at a
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great price is that the vast majority of
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you guys and everybody else is looking
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for would also be happy to buy that so
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there aren't going to be like tons of
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them raining down on me all of the time
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and as a result of that these things are
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rare and I'm not going to find a ton of
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them which forces me to concentrate my
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portfolio so I'm only going to own 5 to
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15 of these stocks not because I can't I
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would love to own 200 of them that would
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give me you know some broad
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diversification benefits but I don't
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think I'm going to be capable of finding
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200 of them so I'm forced to concentrate
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so that's that's one outcome of looking
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for this sort of special rare unicorn so
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with that also my default holding is
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cash I'll hold cash until I find
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something special to meet you each of
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these three key criteria if I don't find
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that I stay with cash that's the default
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for me so now I'm looking for these rare
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things they're hard to find and the
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other part of the problem is that there
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are tens of thousands of stocks out
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there if you look worldwide you look for
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micro caps to mega caps you can buy
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literally tens of thousands of stocks
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and you can do research
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tens of thousands of stocks so how how
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do you deal with this problem you're
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looking for something very rare and you
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have way way too many options to find it
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the way I try one of the ways I try to
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deal with it to improve my odds of
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finding something good is I want to kill
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mediocre ideas as quickly as possible so
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I go back to those sort of platitude
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ideas that's only platitudes of like I
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want a good business with a good
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management team at a good price and I
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want to use those to kill mediocre ideas
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as quickly as possible and the criteria
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that kills the most ideas in the fastest
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way from me is the good business
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criteria so for me a good business is
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one that can earn returns on tangible
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capital above 20% on a sustained basis
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that I understand will still be earning
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high returns on tangible capital in five
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years in ten years and twenty years so
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the quickest way to test something is to
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look at his returns on tangible capital
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so what's this after-tax operating
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profit divided that by tangible capital
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which is working capital and net PP&E if
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I don't see that above twenty percent in
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the past year why am I still looking at
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this stock if I look over the past three
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years and it's not above an average of
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20 percent 20 percent Plus why am I
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still looking at this stock my job is to
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kill this idea and move on and move on
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and move on until I find something that
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is worth spending the hours and days and
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weeks on to really understand I want to
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kill these ideas so that's that's the
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quickest way I've found to kill bad
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ideas or to kill mediocre ideas that
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probably aren't worth my time on
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management I want to look for red flags
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where they do something big they make an
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acquisition they sell it company and
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when I look at that transaction I say
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why in god's name did you do that move
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on on price I try not to look at price
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until later in the process when I valued
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the business that's how I try to winnow
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the field and increase my odds of
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finding something worth spending days
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weeks maybe a month or something like
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that on to figure out so you kill these
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ideas as quickly as you can so that's
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one part of having tens of thousands of
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ideas out there and trying to like make
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sense of that when you want to have a
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constant
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right at portfolio because you want to
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find special unicorns
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