ROIC, Reinvestment Opportunities, and Stock Prices

This chapter discusses the importance of return on invested capital (ROIC) and reinvestment opportunities in determining the quality of a business. It explains that stock prices tend to follow the ROIC, and a higher ROIC leads to better returns for investors. However, this is only true when a company has plenty of reinvestment opportunities.

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Kyle Grieve chats with Compounding Quality about the benefits of quality investing, the tenets of a quality business, why returns on invested capital are the most important metric for measuring quality, the aspects of a quality management team, the attributes of a successful investor, the simple way to measure the returns of an investment, and a whole lot more!

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

07:28 - Why investing in quality is so attractive to investors.

12:40 - The data behind the success of founder-led businesses.

12:40 - Key investing lessons from Warren Buffet, Terry Smith, and Chuck Akre.

33:12 - Why do businesses with high and sustainable returns on invested capital make such a great investment?

28:33 - A simple breakdown of the different types of moats a business has.

47:43 - Why thinking long-term, patience, discipline, and continuous learning are integral for investment success.

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Read Compounding Quality’s Substack here.
Buy yourself a copy of Investing For Growth By Terry Smith here.
Buy yourself a copy of Quality Investing by Lawrence Cunningham, Torkell T. Eide, and Patrick Hargreaves here.
Buy yourself a copy of Quality Shareholders by Lawrence Cunningham here.
Buy yourself a copy of The Founder's Mentality: How to Overcome the Predictable Crises of Growth by Chris Zook and James Allen here.
Buy yourself a copy of The Checklist Manifesto by Atul Gawande here.
Buy yourself a copy of Stock’s For The Long Run By Jeremy Siegel here.
Check out the books mentioned in the podcast here.

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