Only own what you understand inside out

1. How it makes money
2. Where its moat is
3. Exactly where the market has it wrong
4. What would warn you early if the business started to slip

If a company turns out bigger than you thought, it was outside your circle of competence: accept the miss. The circle grows only through research

Why it matters

When the price halves, only understanding tells you whether it’s a bargain or a broken business.

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