Page 4 - Al-Rashed Newsletter July 2020

POTPOURRI
IDENTIFYING A UNIQUE BUSINESS

"With a wonderful business, you can figure out what will happen; you can't figure out when it will happen. You don't
want to focus on when, you want to focus on what. If you're right about what, you don't have to worry about when."-
Warren Buffett

There are only two types of businesses: A Good Business and A Bad Business.

A business can be so good it can be free cash flow machine and a business can be so bad it can be a capital dumping
ground. A suitable business compounds in the long term and that's the potential you should be targeting for.

Defining quality:
0 x 0= 0 (bad business run by terrible management, runs it to the ground)
0 x 1= 0 ( bad business run by a good management, can make or break the business)
1 x 0 =0 (good business run by bad management)
1 x 1=1 (quality business run by terrific management)

But identifying a good business and riding success while it travels a journey to become a unique business requires a
particular intent and in-depth knowledge. While we have come across many businesses in the world which begun as
startups and currently equals a GDP of the emerging economy(s). Name it an Apple or an Amazon, Alibaba the list is
long. But a million-dollar question is how to identify a unique business or a business which over time can transform
from a "good business" into a "unique business"?

QGL =QUALITY, GROWTH AND LONGEVITY

A thumb rule is how fast the creditor or a debtor obligation is served, A business which collects its profit upfront along
with the daily cash flow stands top of the LIST.
FCF (free cash flows) = debtors - creditors
The businesses which enjoy extended creditors obligations and immediate debtor collections win the race.
You don't have to dive into the balance sheet of those businesses but can identify by its business model.
The FCF adds to the ROCE compound mathematics can become ten folds in a decade if it grows at 25% only.
The parentage of the company, management intend for future growth and passion, past and future CAPEX, debt
obligations, state policies, product or a commodity mix would give a fair idea.
Identifying and riding such businesses can give you a dream run in your carrier and could take you the next level.

Ladies and gentlemen, the days of an orthodox way of doing is almost coming to an end, a little common sense,
playing sensibly under overcast conditions against a swinging ball would yield excellent results, stay put and keep
focused.

MR. GOLDY CHADHA
KEY ACCOUNT MANAGER