The Rules of Investing The five-year test: Lev Margolin’s four-step process for finding structural winners
Oct 29, 2025
In this conversation with Lev Margolin, Founder and CIO of System Capital, they explore his innovative four-step framework for identifying companies poised for growth over the next five years. Lev shares insights from his early career, lessons on investment philosophy, and how he balances long and short positions. He highlights examples like toll roads as cash-flow businesses and emphasizes the importance of loss minimization. Lev also warns investors to focus on cash flow amidst market uncertainties and reveals his top stock pick for long-term success.
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Underwrite A Five-Year Structural Win
- Only invest in businesses you can underwrite to a minimum IRR and that will be structurally stronger in five years.
- Use a four-part checklist: stronger with customers, stronger with suppliers, stable or better regulation, and preserved social license.
Think Like Private Equity In Public Markets
- Treat public market investments like private equity by underwriting a conservative five-year return and holding winners.
- That approach forces global selection, long/short construction, and avoids many speculative growth areas.
AI Has Become A Market-Wide Theme
- The AI theme is broadening beyond megacaps into hardware, power and many cyclical segments, increasing index correlation.
- Small-cap speculative rallies and currency debasement are separate but coexisting market dynamics.