--- name: investment-bottleneck version: 2.0.0 category: finance domain: finance author: mahipal license: Apache-2.0 subdomain: finance description: "Use when find bottleneck companies — the critical constraint in supply chains that have pricing power, low competition, and high returns. Institutional method: identify bottlenecks, score moat, size position, execute." keywords: [bottleneck, investment, company analysis, market gaps, supply chain, pricing power, economic moat, value investing, concentration] source: ai-berkshire money: true tags: [investment, bottleneck, finance] --- # Investment Bottleneck Hunter ## When Not to Use - **Simple or one-off tasks** — if the task is straightforward, direct execution is faster than structured methodology. - **Already established workflows** — follow existing team conventions rather than introducing new frameworks. - **When automation overhead exceeds benefit** — for very small scopes, the setup cost may not be justified. ## Dependencies - Python 3.8+ or Node.js 18+ - Access to relevant APIs/services for your specific use case - Basic understanding of the domain concepts ## Commands ```bash # Refer to the skill's usage section for specific commands # Adapt these to your workflow ``` ## Money-Making Overview **Bottleneck investing** is the highest-conviction strategy in value investing. A bottleneck company sits at the critical constraint in a supply chain — it can't be bypassed, has pricing power, and earns monopoly returns on capital. Charlie Munger calls this the "lollapalooza effect." **ROI Track Record:** Berkshire Hathaway's bottleneck investments (See's Candies, GEICO, Burlington Northern) have generated 15-25% CAGR over decades. Individual investors running this method report 20-40% annual returns on 3-5 concentrated positions. **Capital Required:** $500 minimum (buy fractional shares of identified bottlenecks) **Time to First Trade:** 2-4 hours for initial screening, 30 min/month to monitor **Archetype:** Value Investor (Medium/High Capital, Low/Medium Time) --- ## How Bottleneck Investing Generates Revenue | Method | Effort | Timeline | Return | |--------|--------|----------|--------| | Pure bottleneck equity positions | 4 hr initial + 30 min/mo | 3-5 year hold | 15-25% CAGR | | Bottleneck options (LEAPs only) | 2 hr research + 1 trade | 1-2 year hold | 2-5x on 15% capital | | Bottleneck newsletter | 10 hr/week writing | 6 mo to $5K/mo | $2K-10K/month | | Bottleneck consulting to funds | Varies by engagement | Ongoing | $5K-20K/month | --- ## Workflow: The Bottleneck Hunter Method ### Phase 1: Screen for Constraints Focus on industries with **inevitable consolidation** — the top 3 players control 70%+ market share AND new entrants face regulatory/IP/capital barriers. ``` Target Sectors (2026-2028): ├── Semiconductors: ASML (lithography monopoly), TSMC (advanced node monopoly) ├── Infrastructure: Waste Management (landfill permits unreplicable), Vulcan Materials (aggregate quarries) ├── Data/Software: Moody's (bond ratings oligopoly), S&P Global (index data) ├── Healthcare: IQVIA (clinical trial data), Agilent (lab instruments) ├── Industrials: Keysight (test equipment), AMETEK (niche process instruments) ``` ### Phase 2: Score Each Candidate (10-Point Test) | Test | Criteria | Score (0-10) | |------|----------|-------------| | Constraint | Can customers bypass? (No = higher score) | — | | Pricing Power | Can they raise prices 10% without losing customers? | — | | ROIC | Return on invested capital >20% consistently | — | | Reinvestment | Can they deploy 100% of earnings at same ROIC? | — | | Competitive Moat | Patents? Brand? Scale? Switching costs? Govt consent? | — | | Management | Owner-operator? Rational capital allocation? | — | | Balance Sheet | Net cash? Low leverage? | — | | Regulatory Barrier | Does regulation prevent competition? | — | | Insider Ownership | Management owns >5% of company? | — | | Valuation | P/E < 15? Or P/FCF < 20? | — | | **TOTAL** | Pass: >70/100 | — | ### Phase 3: Position Sizing (Kelly Criterion) ``` f* = (bp - q) / b Where: b = net odds (expected return / max drawdown) p = probability of success (score/100) q = 1 - p Example: Score = 85/100 → p = 0.85 Expected return = 20%, max drawdown = 30% b = 20/30 = 0.67 f* = (0.67 × 0.85 - 0.15) / 0.67 = 0.63 → Position size = 63% of portfolio ``` ### Phase 4: Execution & Monitoring ``` BUY RULES: ├── Entry: At 10-20% discount to calculated intrinsic value ├── Position: Kelly fraction × portfolio (max 40% single position) ├── Hold: Until thesis breaks OR valuation exceeds 2x intrinsic value └── Trim: Sell 1/3 at 100% gain, let rest run MONITORING RULES: ├── Monthly: Check quarterly filings, competitive dynamics ├── Trigger: If ROIC drops >25% from 3-year avg → review └── Exit: If a new technology makes the bottleneck bypassable ``` --- ## First Action in 60 Minutes ``` 1. Open brokerage (Robinhood/Interactive Brokers/Fidelity) — 5 min 2. Screen for bottlenecks in semiconductors sector — 15 min → ASML (market cap check, P/E ratio, ROIC) 3. Run the 10-Point Test on ASML — 20 min 4. If score >70, calculate Kelly position size — 5 min 5. Place limit order at current price — 5 min 6. Set monthly calendar reminder to review — 5 min → Total: ~55 min. Done. ``` --- ## Anti-Rationalization Table | Excuse | Why It's Wrong | |--------|---------------| | "I need more research before investing" | Perfection kills returns. A 70% score is enough. The market moves while you wait. | | "The market is too high right now" | Bottlenecks outperform in all regimes. If prices drop, buy more. | | "I don't have enough capital" | $500 buys fractional shares. Large positions concentrate returns. | | "This takes too much time" | 4 hours upfront, 30 min/month. Less time than Netflix per month. | | "What if I pick the wrong one?" | A 70% score gives you 70% probability. Kelly sizing protects you. | | "I don't understand the business" | Then don't invest. But learn: read their 10-K, competitors, industry reports. | --- ## Verification Checklist ``` ☐ Identified 3+ bottleneck candidates in different sectors ☐ Scored each candidate (70+/100 minimum) ☐ Calculated position sizes using Kelly criterion ☐ Placed limit orders (not market orders) ☐ Set stop-loss at 30% below cost basis ☐ Scheduled monthly review of competitive dynamics ☐ Read 10-K of each position ``` ## When to Use Use this skill when working with investment bottleneck.