Millennial Investing - The Investor’s Podcast Network

MI377: How Aswath Damodaran Invests Across The Corporate Lifecycle w/ Shawn O’Malley

Nov 11, 2024

57:56

Snipd AI

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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Quick takeaways

Understanding the corporate life cycle phases helps investors identify varied opportunities and risks associated with different company stages.

Value investors often focus on mature or declining companies for lower prices, which may overlook high-growth potential in younger firms.

Management effectiveness varies across the corporate life cycle, requiring different leadership styles to navigate the unique challenges faced at each stage.

Deep dives

Understanding the Corporate Life Cycle

The corporate life cycle consists of six phases: startups, young growth, high growth, mature growth, mature stable, and decline. Each stage reflects different opportunities and challenges for companies, influencing their growth rates and returns. Startups focus on establishing their business model, while mature companies often prioritize profitability and market share protection. Understanding these phases helps investors identify potential risks and returns associated with their investments.

Intro

6min

Navigating the Corporate Life Cycle

4min

Navigating Corporate Life Cycles

18min

Leveraging Real Estate Opportunities in a Shifting Market

3min

Navigating Corporate Life Cycles

24min

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) discusses how companies can age just like people, how to define and understand the corporate life cycle, why the corporate decline phase is both inevitable and almost always poorly managed, how to invest across the corporate life cycle, plus so much more from studying Aswath Damodaran and recent research from Michael Mauboussin & Dan Callahan of Morgan Stanley.

Aswath Damodaran is a renowned professor of finance at NYU who recently published a book on corporate life cycles. Shawn pulls from Aswath and other sources in painting an actionable picture of the corporate life cycle and how it affects investors while also diving into case studies on three aging companies: Intel, Walgreens, and Starbucks.

Prefer to watch? Click here to watch this episode on YouTube.

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

02:18 - Why companies age

07:37 - What the corporate life cycle looks like

18:03 - How companies can age gracefully (and why most don’t)

23:35 - How Intel, Walgreens, and Starbucks face different and similar challenges of aging

29:23 - Which declining stock Aswath Damodaran is investing in

34:31 - Investing strategies based on the corporate life cycle

36:59 - Why it’s important to diversify across the corporate life cycle

43:19 - Why younger companies carry more duration risk

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.
Clay Finck’s interview with Aswath Damodaran on We Study Billionaires | YouTube Video.
Morgan Stanley’s paper on stages of the corporate life cycle.
Damodaran’s free online course about the corporate life cycle.
Book: The Corporate Lifecycle by Aswath Damodaran.
Book: The Little Book of Valuation by Aswath Damodaran.
Blog post on the investing implications of the corporate life cycle.
Check out the case study on aging on Intel, Starbucks, and Walgreens.
Aswath Damodaran’s YouTube channel.
Aswath Damodaran’s free mobile app for valuation.
Check out the books mentioned in the podcast here.
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