How to Invest Like Chamath Palihapitiya
27 April 2021
Who is Chamath Palihapitiya?
Image source: Time
Chamath is a former Facebook executive who became a venture investor.
He was born in Sri Lanka and moved to Ottawa at the age of 6. He did electrical engineering at the University of Waterloo. He is currently based in San Fransisco.
While still employed at Facebook, he made investments on the side in companies such as Palantir, Pure Storage, and Bumptop (which was bought by Google).
In 2011, he left Facebook to start his fund, The Social+Capital Partnership with his ex-wife. In 2018, he shut his VC funds to new investors.
In the past year, he raised six SPAC. Including one that had merged with Virgin Galactic.
He is also a minority stakeholder and board member of the Golden State Warriors.
No doubt, he has lived a successful life as an investor. So what can we learn about how he invest? Luckily, he often shares his thoughts on investments from many avenues, such as from his Twitter page.
Strategy #1 – Invest in The Winner
It is easier to buy the winner of a particular industry and let it grow over time instead of trying to find a company that will be able to outperform the current top company.
Strategy #2 – Focus on Behavior and Psychology
Chamath said we can have the best model or analysis in the world but if we panic, we lose.
And everybody has a plan until they get punched in the face.
The most important thing we can do to maximize the odds of success is to figure out what, if any, behavioral advantages we can have or can create ourselves.
What rules can you live by that will prevent you from doing something stupid especially when everyone is losing their mind?
Strategy #3 – Buy Companies, Not Stocks
When Chamath buys stocks, he views them as buying companies. It is like hiring a great CEO to work for us or our family. We can rest well knowing that Bezos, Musk etc. are on the job.
He said it is not true for all CEOs so we have to decide accordingly.
Strategy #4 – Buy Companies That Can Potentially 10x in 10 Years
For Chamath, if he is not willing to do that, he will not buy it. His goal is to become disciplined in a process and repeat this process.
Strategy #5 – He Tries Not To Look At Prices Every Day
He prefers to look at the annual report vs quarterly earnings.
He said that if he becomes too short-term focused, he is his worst enemy and he will overthink, overreact and underperform his potential.
Once we have bought a company, the hardest decision is no decision, patiently waiting to be right. Hence, he tries not to look at prices every day because he said the market price and the truth are not always the same. Looking at daily prices makes it harder for him to see the difference between the price and the truth.
Conclusion
In conclusion, Chamath’s investing style is ultimately not about looking at technical patterns or stock charts. He looks at the business and he tries to understand and invest in businesses, not stocks. Once he is vested, he let the CEO do their job, and he targets companies that could potentially 10X in 10 years. Most importantly, he understands that investing is a game where we must identify our behavioral edge and not do stupid things.
Disclaimer:
The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.
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Chris Lee Susanto
Founder, investment blogger, and editor of this value investing x business-like stock investing blog Re-ThinkWealth.com.
Chris is a big proponent of business-like stock investing. He invests in companies where there is value to be found, be it a turnaround, depressed, value, or quality growth company (compounders). He either buys the stock outright or he profits through selling put or selling call options – or buying call options (buying and selling options are especially dangerous for those who do not know how to properly execute it).
Some of the places where Chris has been invited to speak or have added value as a mentor or writer includes Singapore Polytechnic, SMU Institute of Innovation and Entrepreneurship (IIE), Dollars and Sense, The New Savvy, Value Walk Blog, Investment Moats, NUS Tembusu College, NUS Investment Society, CGS-CIMB Singapore, Singapore Financial Conference by NTU IIC, The Financial Coconut Podcast, Money FM 89.3 and Internationally in Myanmar.
Being a full-time investor, Chris knows that he did not beat the S&P 500 return so far (as of the time of this writing) by listening to stock tips. So, when he teaches, he also doesn’t believe in giving stock tips as it is not sustainable for you in the long run. As of now, Chris’s focus is on setting up a MAS Licensed Fund in the future with the goal to beat the market over the long run. Feel free to join his free investment telegram channel here to be the first to be updated on new articles.
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