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A Different Kind of Magic Formula (Solo Episode)

The Security Analysis Podcast

CHAPTER

The Flaws of Investing Based on Cyclical Peaks

This chapter examines the shortcomings of the Return on Invested Capital (ROIC) metric and its propensity to favor companies during cyclical highs. It highlights the case of an egg company to illustrate how market dynamics can render past performance misleading, urging caution in investment decisions based solely on historical metrics.

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