MI241: The Acquirer’s Multiple Strategy w/ Tobias Carlisle
The Intrinsic Value Podcast - The Investor’s Podcast Network
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The One Thing About Buffett's Approach Is That It Works
The average company in the S&P 500 earns about 13.3% return on invested capital. If you find a business that's earning more than that, you've got potentially you've got a special kind of business and it should trade at a premium to the average valuation. But over time, businesses have this tendency to mean revert, so the return on invested Capital drops. So if I've paid twice the multiple and over 10 years, the multiple mean reverts down to the market multiple, what are the chances that I've actually made money? And it turns out that often it's pretty low.
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