MOSL Wealth Creation Study Summary Subash Nayak

Wealth Creation Management MacroBusinessValuationQuality Outstanding management Unquestionable Integrity Focused on core business First generation entrepreneur Outstanding management Unquestionable Integrity Focused on core business First generation entrepreneur ROE/ROCE > 20% Growth > 25% ROE/ROCE > 20% Growth > 25% PEG < 1 Payback ratio < 1 PEG < 1 Payback ratio < 1 Favorable Tailwind Huge size of Opportunity Favorable Tailwind Huge size of Opportunity Not in commodity business Non cyclical High entry barrier business Leadership market position (1st or 2nd) Low capital Intensity Not in commodity business Non cyclical High entry barrier business Leadership market position (1st or 2nd) Low capital Intensity

DNA of an Wealth Creator - 1 Business o Not in commodity business o Non cyclical o High entry barrier business o Leadership market position (1 st or 2 nd ) o Low capital Intensity Valuation o PEG < 1 o Payback ratio < 2 High ROE/ROCE Sustained earning growth (>25%) Business o Not in commodity business o Non cyclical o High entry barrier business o Leadership market position (1 st or 2 nd ) o Low capital Intensity Valuation o PEG < 1 o Payback ratio < 2 High ROE/ROCE Sustained earning growth (>25%) Management o Outstanding management o Unquestionable Integrity o Focused on core business o First generation entrepreneur Macro o Favorable Tailwind o Huge size of Opportunity Size o Preferably Midcap Management o Outstanding management o Unquestionable Integrity o Focused on core business o First generation entrepreneur Macro o Favorable Tailwind o Huge size of Opportunity Size o Preferably Midcap

DNA of an Wealth Destroyer Commodity Business Manufacturing of intermediate products Low ROE

DNA of an Wealth Creator - snippets

DNA of an Wealth Creator - snippets 2004

DNA of an Wealth Creator - snippets

DNA of an Wealth Creator - snippets

DNA of an Wealth Creator - snippets

5 forces of Wealth Creation 1.High ROE 2.Increasing CE 3.Growth 4.Cost of Capital 5.Margin of Safety

3 Component of Value

Valuation and Growth Valuation Consistency of Growth Profitable Growth (FCF gen capability) Sustainability of Growth How much capital needed for Growth Non cyclical Secular Growth Longevity of Earning

Deconstructing ROE

Great, Good, Gruesome

Winning Investment o Winner Category Sector growing 1.5x of GDP o Category Winner Moat + Growth + Management o Reasonable Valuation

Uncommon Profit

SQGLP Framework

Quality of Management

Growth vs Quality

Phases of Commodity Cycle

Commodity Investing