The Intrinsic Value Podcast - The Investor’s Podcast Network MI377: How Aswath Damodaran Invests Across The Corporate Lifecycle w/ Shawn O’Malley
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Nov 11, 2024 Discover how companies age like people and the importance of the corporate life cycle. Learn why the decline phase is often mishandled and what strategies can lead to graceful aging. Explore case studies on Intel, Walgreens, and Starbucks, illustrating their unique challenges. Find out why diversifying across life cycle stages is crucial for investors, and uncover which declining stock a renowned finance professor currently favors. This insightful discussion blends research with actionable advice for savvy investors.
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Value Investors' Growth Blind Spot
- Value investors often overlook high-growth companies by focusing on relative valuation metrics like price-to-earnings.
- This bias can cause them to miss out on major winners, as seen with companies like Apple, Tesla, and Amazon.
Corporate Aging Denial
- Companies, like people, struggle with aging, often clinging to the hope of rejuvenation.
- This denial stems from misaligned incentives, as managers are rewarded for turnarounds but face little penalty for failed attempts.
The Inevitable Decline
- No company can last forever due to creative destruction and inevitable decline.
- Companies transition through six lifecycle phases: startup, young growth, high growth, mature growth, mature stable, and decline.
