Minority Investing
Sources:
Shaan Puri discussed his approach to minority investing in businesses several times on My First Million. Here are some key insights:
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Minority Stakes Strategy: Shaan shared his strategy of buying 30-40% minority stakes in businesses he believes in. His goal is to help these businesses grow by providing capital and guidance, while the original founders retain control. This approach can result in high returns, potentially around 200% per year, leveraging his ability to influence essential improvements 1.
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Challenges in Minority Investing: One common mistake is the belief that one can fix a struggling business. Shaan emphasized that, as a minority investor, you often don't have enough control to make significant changes. Another issue is underestimating the operational complexities and scale requirements necessary for success 2.
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Operational Involvement: For distressed companies, hands-on operational support can be crucial. Mehtab Bhogal mentioned investing in a distressed company with bad margins and transforming it through operational improvements, highlighting the need for active involvement even as minority stakeholders 3.
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Diverse Portfolio: Shaan has considered various types of businesses, from newsletters to high-tech manufacturing, aiming to find sectors where he can add value. He looks for good operators and solid growth potential, ideally acquiring category-winning businesses 4.
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Enjoyment and Learning: Despite the challenges, Shaan finds minority investing enjoyable and educational. It offers a different experience compared to startup investing, with more involvement and potentially higher immediate returns due to partial ownership stakes in established businesses 5.
These insights highlight how nuanced and demanding minority investing can be, requiring careful selection, thorough due diligence, and active engagement to drive success.
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