Bull premortems for optically expensive compounders
The guest argued that when considering selling a high-conviction business solely on valuation, investors should perform a 'bull premortem' to model what growth would justify its current price.
The argument
Using NVIDIA as an example, the guest explained that this exercise helps prevent premature selling of optically expensive companies with deep competitive moats. It forces analysts to map out the aggressive future state required to make the current price reasonable three to five years out.
The thesis, stress-tested
✓ What validates it
- —
▸ Risks discussed
- ▸Extremely high margins may be unsustainable over the long term
- ▸Overestimating the duration of a company's competitive moat
Hear it yourself
"And how you know, for you, at least, in terms of building portfolios and thinking like a long term investor, you know, does that at all does it does the backdrop change anything for you in terms of how you're looking at the markets, or is the answer no? Well, definitely. In the sense, you know, I always say if if I was to pick a, you know, an an animal that sort of manifests, how we manage. You know? I I say sometimes as value investors, we feel like dinosaurs, but but what we really are is like turtles where, you know, these qualities of of resilience and relentlessness and sort of, surviving allows us to persist through changing epics."
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