MOSL Wealth Creation

Study Summary
Subash Nayak
http://art-of-mental-modelling.blogspot.in/
 Outstanding management
Unquestionable Integrity
Focused on core business
First generation entrepreneur

Favorable Tailwind
ROE/ROCE > 20% Management
Huge size of
Growth > 25%
Opportunity

Quality Macro

Wealth
Creation

Valuation Business

Not in commodity business

PEG < 1 Non cyclical
Payback ratio < 1 High entry barrier business
Leadership market position (1st or 2nd)
Low capital Intensity
 DNA of an Wealth
Creator - 1
Management
o Outstanding management
o Unquestionable Integrity
o Focused on core business
o First generation entrepreneur
Business
o Not in commodity business
o Non cyclical
o High entry barrier business
o Leadership market position (1st or
2nd)
o Low capital Intensity

Macro Valuation
o Favorable Tailwind o PEG < 1
o Huge size of Opportunity o Payback ratio < 2

Size
o Preferably Midcap
High ROE/ROCE
Sustained earning growth
(>25%)
 DNA of an Wealth
Destroyer
Commodity Business
Manufacturing of intermediate products
Low ROE
 DNA of an Wealth
Creator - snippets
1999

2000
 DNA of an Wealth
Creator - snippets
2004

2004
DNA of an Wealth
Creator - snippets
2005

2006
DNA of an Wealth
Creator - snippets
2007 2008

2009 2010
 DNA of an Wealth
2010
Creator - snippets

2012
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
Consistency Non cyclical
of Growth Secular Growth

How much capital

Longevity of needed for
Valuation Growth
Earning

Profitable
Sustainability Growth (FCF
of Growth gen
capability)
Deconstructing ROE
Great, Good, Gruesome
Great, Good, Gruesome
 Winning Investment
Winning Investment
o Winner Category
Sector growing 1.5x of GDP

o Category Winner
Moat + Growth + Management

o Reasonable Valuation
Uncommon Profit
Uncommon Profit
Uncommon Profit
SQGLP Framework
Quality of Management
Growth vs Quality
 Phases of
Commodity
Cycle
Commodity Investing
Commodity Investing