Mental Models discussed in this podcast:
- Catalyst
- Activation Energy
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Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode129
Catalysts in Value Investing
- Catalyst Definition
- Trade vs Hold Return
- Free Call Option
- Catalysts speed up the rate of multiple expansion leading to a high IRR "trade" return
- Business Catalysts vs Stock Catalysts
- Solitron Devices Example
Summary:
Catalysts can supercharge investing returns for value investor if utilized properly OR they can distract from a central thesis and cause you to make poor decisions. A catalyst should be seen as a free call option that boosts a "trade" return.
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