What I Learned About Investing From Darwin - Part 2: Buy High Quality at a Fair Price

In this episode, we keep unpacking Pulak Prasad’s What I Learned About Investing from Darwin and move from pure defense to intelligent offense. We recap the non-negotiables from Part 1 (what not to buy), then show how to narrow thousands of stocks to a tight focus list using one “Moneyball” metric: ROCE (Return on Capital Employed). We compare Costco vs. Tiffany to show why operating margin can mislead while ROCE reveals the real engine. From there, we layer on robustness—the business equivalent of a roll cage—using traits like excess cash, fragmented customers/suppliers, high entry barriers, stable management, and slow-changing industries. Real-world case studies (Havells, Page Industries, Mindtree) illustrate how high-ROCE, robust companies survive hits, compound cash, and seize opportunity when others can’t.

We also tackle convergence (why certain business models win across time/geographies and others chronically destroy capital) and “Darwin Ate My DCF” (ditch false precision, value what’s proven). Finally, we break the Pavlovian habit of reacting to macro headlines and hot themes, and double down on the only variable we truly control: entry price.

Key Takeaways

• Slash the universe first: avoid crooks, turnarounds, heavy debt, serial acquirers, fast-changing industries, and misaligned owners.

• Use ROCE as the first filter; it proxies for great ops, smart capital allocation, and real moats.

• Favor robust businesses that can take a punch—and convergent models that win repeatedly.

• Price is the lever. Patience is the edge. Forecast less; observe more.

Next up (Part 3): “Don’t be Lazy—Be Very Lazy.” Why inactivity, focus lists, and fat-pitch timing turn good process into great compounding.