Actionable insights — 4 Stocks You Should Look Into

1. Grade the moat on three levels instead of answering yes or no

1. For each holding, write the single sentence explaining why the customer does not leave.
2. Classify that sentence: Level 1 (convenience) — staying is easy; Level 2 (economic) — leaving costs money; Level 3 (structural) — there is no real alternative.
3. Require the answer to be Level 2 or 3 before the name is investable: "You should focus on Level 2 and Level 3 Moats."
4. Re-run the grading when the technology around the customer changes — a moat can be demoted without the business doing anything wrong.

• Level 3 claims that are really Level 1 wearing a bigger word — "no real alternative" must mean none exists, not that none is currently convenient.

2. Prefer maintenance demand to purchase demand in a cyclical sector

1. Split the sector's revenue into new-unit sales and keeping-the-existing-unit-running.
2. Ask what a recession does to each. Deferred purchases extend the life of the installed base, which raises maintenance demand.
3. Prefer the business positioned on the maintenance side; its cyclicality is muted or inverted relative to the headline sector.
4. Confirm the customer is a professional (a garage, a contractor) rather than the end consumer — professional demand tracks the fleet, not sentiment.

• A structural shift in the installed base — electrification cuts the number of serviceable parts per vehicle, which attacks the volume even while the logic holds.

3. Read a distributor on return on capital, not on margin

1. Do not reject a low net margin in a distribution business; it is structural, since the company is paid for logistics rather than for product.
2. Go straight to ROIC and reconstruct it: a mid-teens-or-better return on a low-single-digit margin means the capital is turning over quickly.
3. Check the balance sheet, because the model relies on inventory financed prudently — leverage is where distributors fail, not margin.
4. Then check whether the valuation is pricing the ROIC or the margin; the market frequently prices the margin.

• Inventory days stretching. In distribution, ROIC decays through the balance sheet long before it shows in the income statement.

4. Use a known analogue to shortcut an unfamiliar market — then check the numbers agree

1. Match the unfamiliar company to a business model you have already underwritten in a market you know ("the Polish AutoZone").
2. List what the analogue implies — scale in purchasing, breadth of catalogue, delivery speed, professional customer base.
3. Verify each implication in the actual numbers rather than assuming it transfers; the analogue is a hypothesis generator, not evidence.
4. Note what does not transfer: market maturity, competitive structure, currency and governance are local.

• The analogue carrying the valuation across as well as the model. A 9.7x multiple in Warsaw is not automatically the same bargain it would be in New York.

5. Treat position count as a function of your own competence, not a fixed rule

1. Accept the framing that "diversification is a double edged sword": it reduces the damage from being wrong and equally reduces the benefit of being right.
2. Set the number of positions from how confident you can honestly be about each — "the more experience you have, the less diversification makes sense."
3. Be explicit that this cuts both ways: little experience is an argument for more names or for an index, not fewer.
4. Test the chosen count against sleep, not spreadsheets — a weight that keeps you awake is too large regardless of the analysis.

• Confusing experience with confidence. The rule rewards demonstrated judgment, and recent good performance is not the same thing.