Podcast, News and Other Thoughts
NFTBC on the Business Brew / Research Pipeline / NFTBC Process
Friends of NFTBC
First things first, I’m working on a couple of projects/posts in parallel at the moment. The first will be an under-the-radar name in the healthcare space - I’m hoping to get this one out soon-ish, so keep an eye out for that.
Second, last week I recorded a podcast with Bill Brewster on the the Business Brew - I enjoyed the conversation. We talked about NFTBC and spent a bit of time on REGN, BMW and one or two other names. You can listen here, if you would like to:
Be sure to subscribe to the Business Brew if you haven’t already. Bill’s a thoughtful host and asks great questions - I can only hope that I answered some of them intelligently.
I think my weakest answer was to Bill’s question about what the process looks like at NFTBC. I sort of waved the question away by saying there’s no formula or rulebook that I follow - while this is effectively true, it’s also a bit of a cop out. As an independent analyst-writer I think I’ve elaborated pretty well by this stage on the what and the why (e.g. here, here and here). But not as much on the how - the process. I suppose the process, insofar as there is one, is just something I do without ever having formally codified it or putting much thought into explaining it. What follows, is a few brief thoughts on how I might have answered the question better.
It’s true that I don’t work formulaically. I don’t like to have too many rules, preferring the flexibility of more of a principles based approach (instructed by the what and why).
Idea generation
Most (if not all) of the ideas for businesses to write about are sourced independently. In other words, in most cases, I probably won’t have seen or read a write-up by someone else before I dive in.
In terms of leads, they really can come from anywhere. Quite often, leads arise unexpectedly when I’m looking at or reading about something tangential or maybe something altogether unrelated. Other times, when I’m at a bit of a loose end, I like to sift through long lists of stocks just to see if anything jumps out - although I don’t run screens. I quite like to work quickly and visually at this stage - bringing up lots of different stocks, displaying financials in charts, scanning through information about management etc. I pass over practically everything for one reason or another.
Research phase
Many ideas look interesting to me intuitively and quickly. The next step is then about figuring out if the intuitions were any good and unearthing important considerations that are worth understanding. My process then essentially revolves around figuring out which questions to ask and then trying to answer them in a satisfactory way. And the deeper I go, the more questions arise. When I start out I don’t even know what most of the questions are going to be. Some of these questions are undoubtedly stupid ones. Some are perhaps more intelligent. I continue in this iterative process until I’m comfortable that I’ve identified the most important aspects of the business for my purposes alongside the relevant risks and uncertainties (i.e. questions that cannot be answered, for the time being).
Similar to the output, the process is far more qualitative than quantitative. But it’s not to say the numbers are not important, they are. Actually I insist on a somewhat laborious process of extracting figures myself manually from years’ worth of financial statements. I’ve never really trusted the fidelity of third party data. But more importantly, I tend to find that the numbers tell a more instructive story when I pull them out myself. The very extraction process becomes a learning exercise and I’m more likely to notice things and ask questions along the way - rather than skipping straight to a pre-populated Excel sheet.
It’s always my ambition to rule out dead ends as quickly as possible, before I invest too much time. But, alas, very occasionally I might get quite far before I assess the opportunity to be a no-go. Actually I’ve already had one of these this year, although there’s a possibility I could revisit that one in future.
Writing phase
The writing phase usually begins well before the research phase has finished - one feeds back into the other. Putting thoughts into writing ends up generating more research questions.
As to the writing process itself, I don’t have much of a template. Each post is generally bespoke. The approach and format I end up pursuing, emerge in a bottom-up fashion as the research progresses. Every business is unique and context-specific and flexibility seems to be the most accommodating way to deal with that.
AI
I’ve touched on AI before. It will always be the NFTBC promise not to use LLMs in writing, except in a very limited fashion and always identified as such. Neither do I routinely use AI for automating data-type tasks - other than for occasional genuine chores, where there won’t be any ancillary benefits from carrying out the heavy lift myself. I do however now use AI in the research part of the process, in an iterative/dialectic way. I find it very helpful in helping to surface new questions. Insofar as the AI purports to give me the answers, I approach these with scepticism - always seeking to challenge and verify, including from original sources.
Walking
I’ve always walked a lot, out in the fresh air. Insofar as I have ever have any original insights (up for debate) they’re most likely to occur when I’m out walking rather than sitting at a desk.
My hope is that the net result of all of this is something a bit different, interesting and potentially interesting.
Thanks for Reading.