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#60 Torbjörn Arenbo: Capital Allocation and Value Creation

Investing by the Books

CHAPTER

Earnings Quality and Capital Allocation in Value Creation

The chapter explores the importance of earnings quality in relation to the cost of capital, emphasizing the impact of low margin volatility on company valuation and long-term returns. It discusses how companies balance margin improvement and growth to achieve value creation, touching on examples like Ericsson and Thiele. The conversation delves into the significance of capital allocation as a competitive advantage, emphasizing the benefits of long-term thinking and understanding return on investor capital.

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