Tag: Compounding
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Three engines, and the people driving them
The Quality Series · part 8 of 13 Free cash flow per share can compound in three ways. The first is to grow the cash flow itself. This is the classic compounder — a durable moat, high returns on capital, real pricing power — allowing it to compound earnings and cash flow per share at…
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Why return on capital decides it
The Quality Series · part 6 of 13 Munger made a point I have never been able to improve on. If a business earns 6% on its capital over forty years and you hold it for forty years, you will not do much better than 6%, even if you bought it cheaply. If it earns…
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The secret sauce
The Quality Series · part 5 of 13 If I had to name the single most important factor behind long-term outperformance, it would be what Buffett called economic goodwill — to me, the primary measure of a business’s capital efficiency. I first wrote about it in 2016, and it has been the cornerstone of how…
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Where stock returns actually come from
The Quality Series · part 4 of 13 The return from owning a share comes from the growth in free cash flow per share, from a change in the multiple the market is willing to pay for that cash flow, or from a combination of the two. That is all. Everything else — the narrative,…
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The whole idea, in one line
The Quality Series · part 1 of 13 People sometimes ask me, usually over dinner, what I actually do. The honest answer fits in one line: own shares in a small number of the finest businesses in the world, refuse to overpay for them, and have the patience to let compounding do the work. Each…
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The Most Patient Capital in the World
A sovereign wealth fund is structurally the closest thing on earth to Berkshire Hathaway — permanent capital, no redemptions, a generational horizon. So why does almost none of that capital behave that way?