Reinvestment, moat, follow Up: Capital Light Compounders Base

IMC looks to partner with exceptional management teams and is focused on being a long-term owner of a family of companies. . It is just as useful to think about what happens when companies find themselves outside of the. Working capital is dynamic and it is not necessary to calculate a precise number down to the last dollar to arrive at a general conclusion.

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Your use of any information or materials on this website is entirely at your own risk, for which we shall not be liable. In other words, Amazon, particularly as it transitions to being more of a commerce platform and less of a retailer, is a two-sided network.

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My current thought is that in an inflationary environment the Capital-Light Compounder is the preference because the lack of physical assets enables revenues to increase without the corresponding need for heavy capital expenditures at inflated rates. As John outlined in a recent post ( link a simple formula for estimating the rate of increase in intrinsic value is: This makes sense, if a company keeps 50 of earnings and reinvests that capital at a 20 rate, over time that should add. The names, images and logos identifying moat Manufacture, moat Manufacture Ltd and/or Marek Jankowski or third parties and their products and services are subject to copyright, design rights and trademarks of moat Manufacture, moat Manufacture Ltd and/or Marek Jankowski and/or third parties.

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Amazon is a little harder to classify thats kind of entailed in the name. Reinvestment Moat: This is the rare company that has all of the benefits of a Legacy Moat along with ample opportunities to deploy incremental capital at high rates within the current business. On the opposite side of the map are phone carriers in a post-iPhone world: carriers have strong network effects, both in terms of service as well as in the allocation of fixed costs. This is a powerful concept for a growing company, as the customers are essentially financing the growth through pre-payments. Best of all the interest rate on this financing is 0, pretty tough to beat.

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One option would be to allocate the excess capital into mergers and acquisitions in an effort to grow earnings power. Legacy Moat Returning Capital: These businesses have an entrenched position within current markets that enable strong and consistent profitability relative to the prior invested capital. You also agree not to adapt, alter or create a derivative work from any content. The Supplier Differentiation Spectrum, consider the six companies I mentioned above: Facebook, Google, Amazon, Netflix, Apple, and Microsoft.

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