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Ep 346. Q&A: Investing Mistakes, Holding Compounders, ROIC, FCF + Growth

Focused Compounding

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Why Do Stocks Returns Follow the ROIC of the Underlying Business?

In many industries that we look at, the amount of value they can add in the future is very tied to return on capital. Phil Fisher liked companies that grew all the time and didn't talk about good margins or anything like that. But if you look for companies that can grow at 15% a year for 15 years in a row, they're all highly profitable. So I think that it's really the fact that profitability and growth across most industries are so close that I don't think these measures really matter much.

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