Developing a strong filter is paramount to finding great companies and holding onto them. In a world of thousands of stocks, you only need a handful.

I’m looking for no-brainer growth trends, emphasizing qualitative characteristics and constantly asking, “how much optimism is baked in the price?”

I place emphasis on unit economics, free cash flow, runway, narrative, incentives, and human nature.

Strong theses rely on a limited number of predictions and/or worries about outside factors, e.g. if-then statements, macroeconomic variables, etc.

Downside is protected through discipline in entries along with careful selection of which industries and situations to not get involved in. This often means avoiding “getting cute”.

Common themes: simple value propositions, customer-company win-wins, secular growth, aligned incentives, duopoly/oligopoly, pick and shovel plays, idiot-proof capital allocation, root in things that won’t change (human nature)

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“You don’t go into business and say I want to create a company that grows at 15% a year, has a 22% return on equity and never has a down year. You create a product or opportunity set that people need, and if you do a good job then the numbers and financial metrics flow from that,” Douglas Foreman, Kayne Anderson Rudnick.