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#53 Todd Wenning on Lessons from the Titans
Investing by the Books
Balancing growth and capital investment in businesses
The key insight here is the concept of balancing capital input with business growth. Overfeeding a business with capital can lead to declining returns on vested capital, while underfeeding it can result in poor utilization. In capital-intensive businesses, rapid growth can lead to the need for increased employee count and investments, which may in turn lead to declining returns. On the other hand, businesses with a capital light model can handle more growth. There's also a focus on identifying companies with durable growth rates, like those growing steadily at 6% a year, which can be very attractive for investment. Additionally, acquiring companies with strong growing cash flows can contribute to a repeatable and successful business model.
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