The Mirandolan Newsletter
The weekly newsletter looks at how changes in the capital cycle within an industry will affect future returns or how the competitive position of a company will change according to changes in the industry’s supply side.
High returns invite excessive competition and capital spending, creating excess capacity while grinding economic earnings down to the cost of capital, whereupon, capital exits, excess capacity is destroyed and competition is diminished, a process of creative destruction. The ebb and flow of capital works in a predictable, cyclical manner, what Marathon Asset Management calls, the “capital cycle”, a concept pursued in Edward Chancellor’s book, Capital Returns, a compilation of reports written by Marathon’s portfolio managers. I look at capital cycles around the world, share valuations on the odd occasion I find a business I like, discuss the macro-picture when I think it has an appreciable impact on future returns and share any ideas I think will add to your investment process. In all instances, I seek to buy where prices reflect unreasonably low expectations for future growth.You can sign up for it here.