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.
Important: Please read our full disclaimer.
Learned something?
Share this article with your friends in your WhatsApp or Telegram group now 🙂
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.
Don’t Leave First, Read Also:
2 Billion Users ( > China Population): Why I Am Long on Facebook Stock
But over time, I would like to invest in good businesses at a fair price instead of continuing to invest in an OK business at a cheap price. Due to Facebook’s recent drop in its share price, I took a stake in Facebook during the past few months and right now, it consists of about a quarter of my portfolio.
Part 2 of 2: The Limitations of The Black Scholes Model (by Warren Buffett)
Before we touch on the limitations of Black-Scholes. let’s do a brief recap. In the first part of the article, we talked about how the Black-Scholes model is used to price options. They are commonly known as the options pricing model to know the fair price of the put or call options. There […]
Part 1 of 2: Here’s How to Use The Black-Scholes Model to Price Options
The Black-Scholes model was first developed by three economists. Two of them – Myron Scholes and Robert Merton – received a Nobel prize in 1997 for their work in this model. The Black-Scholes model is also commonly known as the options pricing model. And as the name indicates […]
New Logo Design for Re-ThinkWealth (Value Investing Blog)
The above image is how the new Re-ThinkWealth logo looks like. As you might have noticed, it is a combination of “R” and “W” which stands for Re-ThinkWealth. At the same time, the shape of the logo embodies the resemblance of how a stock market will behave. The stock market goes down and up […]
Here Are My Reflections After 3 Years 7 Months in The Stock Market
So basically, I knew that if I cannot beat the S&P 500 return over the long run, it’s better if I just invest in the S&P 500. While the S&P 500 practices in a huge diversification of 500 big companies listed in the U.S., my U.S. portfolio practices concentration of ideas in which I am most certain about […]
10 Reasons Why We Should Rethink How to Build Our Wealth
I am 25 years old this year and I am always fascinated by how a change in our thinking can result in a huge change in our wealth. I am convinced by the notion that how we think creates the wealth that we have. And writing has been an integral part of it all because it gives me an avenue to pen […]
Here’s My Quick Thought on Starbucks Stock
Starbucks is a company that needs not much introduction. I am sure that most of us have drunk Starbucks coffee before. And many of us have studied or did some work or caught up with a friend there. Starbucks is a familiar company that is in almost every airport around the world. Their story though started back in Seattle […]
Theranos Incident Shows Why It’s Dangerous to Invest Based on Hopes And Dreams
I do admit that a business is nothing without goals, hopes, and dreams. A successful business requires the founder to have a vision and to be able to turn that vision into reality. A successful business is one that has managed to turn hopes and dreams into reality. And by reality, I mean cash. Cold hard cash. Think Apple, […]
Qualcomm Will Not Supply Apple’s 2018 iPhones – And That is Okay (Q3 2018 Results)
Qualcomm is the company that supplies phone makers like Samsung, Xiaomi, Huawei, Apple chips so that their phone can be a “smartphone.” Different chip suppliers will have different chips. And just by having a different chip, the performance of the phone can vary greatly. I am vested in Qualcomm since 24 January 2018 at an average price of about $53. Here are the […]
Thinking of Betting in World Cup 2018 or Investing in Stocks? Read this first.
1. Soccer is very unpredictable – The ball is round. as of 28 of June 2018 in the qualifying round, Germany is out of the world cup. Who could have predicted that? Not UBS and Goldman Sachs, that’s for sure, who predicted Germany would win the cup and go to the final respectively. 2. The more the potential payout, the lesse […]
24/3/2017 Was The First Time I Bought GameStop: About Time a Private Equity Firm is Interested in it!
Because the fact is that today, it is reported by Reuters that GME has received buyout interest and is holding talks with private equity firms about a potential transaction. Seems like Sycamore Partners – one of the PE firms that have expressed interest in GME agrees with my conclusion and analysis that GME is mispriced […]
Sony – Deep Value?
Sony is at an inflection point after years of restructuring. Having shed and restructured loss-making business units, it comfortably exceeded its 2014 medium-term plan to deliver an ROE of 10% and operating profit of JPY500bn in FY17. The company is seeing a number of tailwinds for games, music, and the semiconductor segments […]