The Only Way That Buy and Hold Ever Works: How Compounders Create Value

Twitter: @Focusedcompound

Focused Compounding is an exclusive, members-only site for buy and hold value investors. Inside, you will find research writeups written by hedge fund manager, Geoff Gannon. Experience all this in the company of investors who follow the principles of Buffett, Munger, and Fisher instead of the whims of the crowd.

[SivaramVelauthapillai]

This is one of the best explanations of investing and how to outperform you will ever find. Breaks down the fundamentals in a way reminiscent of Warren Buffett. Amazing episode by Geoff and Andrew. Keep up the good work on these podcasts. 👍

[highc]

Great podcast, gentlemen. This one was worth a rewatch.

[learnjava]

Awesome! You guys nailed it. Made investment so simple. Much better than academic formulas and ratios.

[paulmeng]

Another question is "Isn't Asset Play considered as a type of bet for change?" It is betting on the management to wake up and do something to activate the hidden value. In the extreme case it might stay low forever for unknown reason where market simply doesn't notice about it. Warren Buffett decided to take a board member seat of sanborn map so that he can have a say on the value but not gave his life line to the market. For sure it is not a replacement of management and turn around but it still requires some works unless you use Walter Schloss' approach to use the law of large number to make yourself statistically favorable on "management would do something"

[carlmannhard]

What could you pay for a company that is scaling up fast and where you can see marigns improve over time? If FCF or earnings are growing faster than revenue is that always just a function of scale advantages?

[douglas]

Great podcast. This is exactly what I've been looking for. I'm excited for more 😁

[paulmeng]

I would miss the intro speech by Geoff.

[paulmeng]

I don't quite understand the part about the calculation of 1 / 0.08 = 12.5 cents on retained earning.



My thinking is like this:



Suppose EPS would grow from 1 to 1.01 next year, and by the required hurdle rate of 8%,
The already invested capital would generate EPS 1 next year, so that means I only need (0.01 / 1.08) ~= 0.93 cents per share of extra capital deduct from earning to fund the 1 cent EPS growth. (Assuming ROE = ROIC here)
It looks like the retained earning only need to be 0.93 cents per share but not 12.5 cents. Do I miss anything?

[vladko]

I disagree on remark regarding paying debt down does not make sense. You can improve Intrinsic value by decreasing leverage, because investors will not see company so risky, in terms of sensitivity to interest rate changes, thus lower beta, and as a result lower wacc.