Think and invest - we continue to write our newsletter!
Hello Investors!
It's been a while since my last email, and I'm thrilled to reconnect with you. During this break, I've been busy expanding my portfolio and closing several private equity deals, which has provided me with a wealth of new insights to share.
Firstly, some housekeeping: I noticed that many of you subscribed through different platforms, causing a bit of confusion. Some of you subscribed through Substack while others signed on Beehiv. To streamline things, I'll now be sending this newsletter exclusively through Substack. This change will ensure that more of you can easily access the content.
In this newsletter, I’ll be sharing practical insights from my experiences in both public and private investing. Over the years, I've tested numerous strategies, and I’m eager to pass on the knowledge I've gained. I'll be posting four times a week—Monday, Wednesday, Friday, and Saturday. On weekdays, expect updates on the latest news and investment strategies. Saturdays will be dedicated to book recommendations, podcasts, and events to help you grow your knowledge as well as your wealth.
Thank you for being part of “Think and Invest.” I'm excited to share this journey with you.
In todays letter
Learning: Public vs. Private Equity Deals: Which is Better?
News insights
Goldman Sachs Boosts India's 2024 Growth Forecast to 6.7%
Saudi Fashion Industry Soars to $25B, Startup Funding Flourishes
China Infuses $47.5B into Chip Industry Expansion
Key takeaways from Starbucks' CEO Interview
Public vs. Private Equity Deals: Which is Better?
Through my journey and learning, I've encountered a lot of information about people who focus exclusively on private equity deals (buying private businesses) and those who focus solely on public equity deals (buying stocks). Let's discuss the main differences.
Private Equity Deals:
Abundant Opportunities: There are approximately 30 million small businesses in the US and around 25 million in Europe. These businesses contribute significantly to the GDP of their respective countries, with small businesses accounting for about 44% of the US GDP. This abundance means there are many potential deals to explore.
Negotiation is Key: When pursuing private equity deals, negotiation is crucial. Unlike public markets, where prices are set by supply and demand, private deals require direct negotiation with business owners. This involves everything from discussing valuation to agreeing on terms of the sale.
Limited Financial Transparency: Many private businesses, especially those with revenues between $2-5 million, lack robust accounting and reporting systems. This lack of transparency can be a challenge but also an opportunity to find undervalued "hidden gems."
Valuation Challenges: Business owners often have high expectations for their companies' valuations and prefer cash deals. This can make negotiations tougher compared to public equity transactions.
Public Equity:
Open Financial and Company Data: Public companies are required to disclose comprehensive financial information, including quarterly and annual reports. This transparency makes it easier to assess a company's health and potential.
Market-Driven Pricing: In the public markets, stock prices are influenced by market dynamics rather than individual negotiations. This can lead to more efficient pricing but also greater volatility.
Patience Pays Off: One of the key advantages of investing in public equities is that the market rewards patience. Long-term investors often benefit from compound growth and dividends over time.
Liquidity: Public equities offer greater liquidity compared to private deals. You can buy and sell stocks relatively quickly, providing more flexibility in managing your portfolio.
Warren Buffett, early in his career, also dabbled in buying private businesses. However, he quickly shifted his focus to public companies. Initially, Buffett applied the "cigar butt" approach to investing, seeking undervalued companies that could provide short-term gains. He purchased Berkshire Hathaway, initially a struggling textile company, as part of this strategy. However, this experience led him to realize the limitations of the cigar butt approach. Under the influence of Charlie Munger, Buffett transitioned to investing in high-quality businesses with strong potential for long-term growth. This shift in strategy allowed Buffett to transform Berkshire Hathaway into a highly successful conglomerate, marking a significant evolution in his investment philosophy.
News insights
Goldman Sachs Boosts India's 2024 Growth Forecast to 6.7%
Goldman Sachs has revised India's GDP growth forecast for 2024 upward to 6.7%, citing room for increased fiscal spending by the government. The Reserve Bank of India (RBI) is expected to consider a 75 basis points rate cut starting in Q3 FY2024-25, while retail inflation is projected to remain between 4-4.5% in the latter half of 2023-24.
[📝Full article]
Key takeaway
This upward revision indicates a strong economic outlook for India, driven by both public investment and robust private consumption. Investors should monitor the upcoming Q4 GDP announcement and RBI's monetary policy adjustments, as these will provide critical insights into the market's trajectory and potential investment opportunities.
Saudi Fashion Industry Soars to $25B, Startup Funding Flourishes
Saudi Arabia's fashion industry is thriving, valued at nearly $25 billion, with significant growth in local brands and robust startup funding. The sector is projected to see a 48% cumulative increase in value between 2021 and 2025, emphasizing its growth potential.
[📝Full article]
Key takeaway
This booming fashion sector presents substantial investment opportunities for entrepreneurs and investors. Stakeholders should focus on supporting local designers and innovative startups to capitalize on this growth, enhancing Saudi Arabia's footprint in the global fashion industry.
China Infuses $47.5B into Chip Industry Expansion
China has launched its largest-ever semiconductor state investment fund worth $47.5 billion to strengthen its position in the global tech landscape amid US export restrictions. This investment marks the third phase of the China Integrated Circuit Industry Investment Fund, aiming to advance the country's chip manufacturing capabilities by 2030.
[📝Full article]
Key takeaway
For investors, this massive funding underscores China's commitment to achieving tech self-reliance despite external pressures. Investors should monitor the progress of China's semiconductor initiatives and potential shifts in global supply chains, which could present new opportunities and challenges in the tech sector.
Key takeaways from Starbucks' CEO Interview
Here are five great takeaways from the video featuring Howard Schultz discussing Starbucks:
Return to Core Values: Howard Schultz emphasized the importance of returning to the core values of Starbucks, focusing on the authenticity of the Starbucks experience, and addressing the dilution of the brand's unique atmosphere. This involves reinforcing the company culture and values to reconnect with customers and employees.
Leadership and Vision: Schultz highlighted his leadership role in turning the company around by making tough decisions, such as retraining employees and closing stores temporarily. His vision for the future includes making Starbucks stores more relevant and exciting while maintaining high ethical standards in sourcing coffee.
Balancing Profitability with Social Responsibility: Schultz advocates for a business model that balances profitability with a social conscience. He believes that businesses have a responsibility to do more for their communities and that doing the right thing can also lead to greater profitability.
Building a People-Centric Business: Schultz's philosophy is that Starbucks is in the people business serving coffee, not just the coffee business serving people. This approach emphasizes creating an emotional connection with customers and exceeding the expectations of employees to ensure overall success.
Personal Story and Inspiration: Schultz shared his personal journey from growing up in a poor neighborhood to leading a global brand. His story underscores the importance of perseverance, dreaming big, and not letting anyone discourage one's ambitions. He encourages young people to pursue their dreams despite challenges.
Thank you for the reading and see you next time!