To The Moon

Hello everyone! Today I want to share some trading strategies with you!

1.

The Stock

$Paycom(PAYC)$ shares have returned 28.8% annually since its inception in 2014.

However, over the last 5 years, the returns have been flat.

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Paycom is a founder-led Software-as-a-service Business in the US

The stock is on a -70% pullback from its ATHs

The business has great fundamentals and promising prospects

Let's take a deeper look:

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2.

$Alphabet(GOOG)$ has made 3 of the top 5 acquisitions of all time.

YouTube bought for $1.65B now brings in $32B of revenue annually.

Android bought for $50M is used by more than 3.6B devices worldwide Incredible!

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3.

Newton’s Laws of Motion states:

“A body in motion remains in motion or a body in rest remains at rest unless acted upon by a force”. I believe this rule is true for investing as well.

A stock that has gone nowhere for 5-10 years will not get into motion (upward or downward) unless it is acted upon by a force.

A force in this case can be what we usually call a “catalyst” – something that will trigger the share price to move.

This can be:

· Divestments

· Special dividends

· Better than expected earnings

· New major shareholders

· New management

On the other hand, a share that is in constant motion will continue to be in motion until it's acted upon by a negative force. These stocks are what I’m looking for.

They are already in motion to the upside due to multiple factors: · Value creation for shareholders

· Attractive products with high demand

· Continuous expansion

· Pricing power

· Profitable acquisitions strategy

· Management that is aligned with shareholders

· Multiple levers for growth

· Multiple levers for margin expansion over time

2 examples of such businesses:

$Constellation Software, Inc.(CNSWF)$

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$Berkshire Hathaway(BRK.A)$

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These 2 compounders have been moving up in a linear line for years, reflecting the value they are producing for shareholders. Looking at their fundamentals, it is easy to understand why the share price has moved significantly:

Constellation Software In the last 10 years:

· Revenue have 6.5X

· Net income have 5.6X

· Free cash flow have 9X

Berkshire Hathaway In the last 10 years:

· Revenues have 2.5X

· Net Income have 3.9X

· Free cash flow have 3.9X Value Creating Businesses are Superior investments if you can invest in them at a fair price. Compounders are in motion to the upside, their revenues, earnings, and cash flows are increasing year after year.

They might see a year or two where growth stagnates but continues the following year to compound shareholder capital. It is far easier to invest in a company that is already in motion than to predict when a stagnant business will be acted upon by a force.

This force can take years to play out, and in the meanwhile, our value-creating compounders just keep delivering good results for us. It is much easier to jump into something that already is (Berkshire being a great compounder) than to predict something “to be” (PayPal will turn around its business and yield one hell of a return).

Yes, you might be right in your turnaround play, but most turnarounds never actually turn around. Investing in predictable cash-flowing businesses that have a growing demand for their product is just easier.

In a complex game like investing, I believe in simplifying where you can to yield the best results over time. I’d argue that owning value-creating businesses is better for the mind, soul, and body of investors and therefore much healthier than owning a trainwreck business that might go bankrupt or do a decent turnaround.

The stress of seeing your capital moving violently to the downside is what causes many investors to make poor decisions. By investing in great businesses, we can minimize this effect and maximize the chance of sticking with our great businesses.

Conclusion Investing in value-creating businesses:

· Reduces stress

· Promotes long holding periods

· Is likely to provide a great result

· Minimizes investor behavioral risks (FOMO/Panic)

· Follows Newton’s law of motion

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