Bacaan buat weekend ini. Semoga bermanfaat!!!

Multiples are not drivers of returns. They’re outcomes. A stock usually looks cheap because the underlying business has one (or more) of the following problems:
*Low or deteriorating returns on capital
*Limited reinvestment opportunities
*Weak competitive positioning
*Poor capital allocation
*Structural decline disguised as value

In other words, it’s cheap for a reason. 𝐓𝐡𝐚𝐭’𝐬 𝐰𝐡𝐲 “𝐜𝐡𝐞𝐚𝐩” 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬 𝐨𝐟𝐭𝐞𝐧 𝐞𝐧𝐝 𝐮𝐩 𝐟𝐢𝐥𝐥𝐞𝐝 𝐰𝐢𝐭𝐡 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬𝐞𝐬 𝐭𝐡𝐚𝐭 𝐧𝐞𝐯𝐞𝐫 𝐭𝐫𝐮𝐥𝐲 𝐜𝐨𝐦𝐩𝐨𝐮𝐧𝐝. 𝐓𝐡𝐞𝐲 𝐭𝐫𝐚𝐝𝐞 𝐬𝐢𝐝𝐞𝐰𝐚𝐲𝐬, 𝐝𝐞𝐦𝐚𝐧𝐝 𝐜𝐨𝐧𝐬𝐭𝐚𝐧𝐭 𝐦𝐨𝐧𝐢𝐭𝐨𝐫𝐢𝐧𝐠 𝐚𝐧𝐝 𝐫𝐞𝐥𝐲 𝐨𝐧 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐫𝐞𝐫𝐚𝐭𝐢𝐧𝐠 - 𝐧𝐨𝐭 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐪𝐮𝐚𝐥𝐢𝐭𝐲 - 𝐭𝐨 𝐠𝐞𝐧𝐞𝐫𝐚𝐭𝐞 𝐫𝐞𝐭𝐮𝐫𝐧𝐬.

There’s nothing inherently wrong with this approach. In fact, Warren Buffett followed it for many years, applying the framework Ben Graham taught him back in the 1950s. Over time, however, his philosophy evolved in a different direction. Businesses that consistently earn returns above their cost of capital tend to deliver superior long-term results - especially when purchased at reasonable prices, which is far more difficult than it sounds.

Long-term returns don’t come from buying low multiples. They come from owning businesses that can compound internally. The true engine of wealth creation is simple:

𝐑𝐎𝐈𝐂 × 𝐑𝐞𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 × 𝐓𝐢𝐦𝐞

Great businesses:
*Earn high returns on capital
*Can reinvest large amounts at those returns
*Do it consistently, over long periods

This is why Charlie Munger once said:
“Over the long term, the return on a stock will be very close to the return on capital of the business itself.”

Valuation can fluctuate wildly in the short run (with occasional multiple expansion or compression), but returns on capital tend to win in the end. The lesson isn’t that valuation doesn’t matter.

𝐈𝐭’𝐬 𝐭𝐡𝐚𝐭 𝐦𝐨𝐬𝐭 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 𝐝𝐫𝐚𝐦𝐚𝐭𝐢𝐜𝐚𝐥𝐥𝐲 𝐮𝐧𝐝𝐞𝐫𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞 𝐭𝐡𝐞 𝐩𝐨𝐰𝐞𝐫 𝐨𝐟 𝐜𝐨𝐦𝐩𝐨𝐮𝐧𝐝𝐢𝐧𝐠 - 𝐚𝐧𝐝 𝐨𝐯𝐞𝐫𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞 𝐭𝐡𝐞𝐢𝐫 𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐭𝐨 𝐭𝐢𝐦𝐞 𝐛𝐞𝐭𝐭𝐞𝐫 𝐞𝐧𝐭𝐫𝐲 𝐩𝐨𝐢𝐧𝐭𝐬.

𝐈𝐟 𝐲𝐨𝐮 𝐛𝐮𝐲 𝐚 𝐟𝐚𝐢𝐫 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐚𝐭 𝐚 𝐠𝐫𝐞𝐚𝐭 𝐩𝐫𝐢𝐜𝐞, 𝐲𝐨𝐮𝐫 𝐫𝐞𝐭𝐮𝐫𝐧 𝐝𝐞𝐩𝐞𝐧𝐝𝐬 𝐥𝐚𝐫𝐠𝐞𝐥𝐲 𝐨𝐧 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐯𝐞𝐫𝐠𝐢𝐧𝐠 𝐭𝐨 𝐬𝐨𝐦𝐞𝐭𝐡𝐢𝐧𝐠 𝐦𝐨𝐫𝐞 𝐫𝐞𝐚𝐬𝐨𝐧𝐚𝐛𝐥𝐞. 𝐎𝐧𝐜𝐞 𝐭𝐡𝐚𝐭 𝐡𝐚𝐩𝐩𝐞𝐧𝐬, 𝐭𝐡𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐢𝐬 𝐞𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞𝐥𝐲 𝐨𝐯𝐞𝐫.

𝐀 𝐠𝐫𝐞𝐚𝐭 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬, 𝐨𝐧 𝐭𝐡𝐞 𝐨𝐭𝐡𝐞𝐫 𝐡𝐚𝐧𝐝, 𝐤𝐞𝐞𝐩𝐬 𝐰𝐨𝐫𝐤𝐢𝐧𝐠 𝐟𝐨𝐫 𝐲𝐨𝐮. 𝐈𝐭 𝐜𝐨𝐦𝐩𝐨𝐮𝐧𝐝𝐬 𝐢𝐧𝐭𝐞𝐫𝐧𝐚𝐥𝐥𝐲, 𝐲𝐞𝐚𝐫 𝐚𝐟𝐭𝐞𝐫 𝐲𝐞𝐚𝐫, 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐫𝐞𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐜𝐨𝐧𝐬𝐭𝐚𝐧𝐭 𝐝𝐞𝐜𝐢𝐬𝐢𝐨𝐧𝐬.

A simple framework to think about expected returns:

𝐅𝐫𝐞𝐞 𝐜𝐚𝐬𝐡 𝐟𝐥𝐨𝐰 𝐲𝐢𝐞𝐥𝐝 + 𝐌𝐞𝐝𝐢𝐮𝐦-𝐭𝐞𝐫𝐦 𝐠𝐫𝐨𝐰𝐭𝐡 𝐫𝐚𝐭𝐞.

If the combination comfortably exceeds the market’s long-term return of roughly 12-13%, the odds are in your favor - regardless of whether the stock ever looks “cheap.”

Great businesses rarely look cheap and that’s not a coincidence. If a company consistently earns high returns on capital and reinvests well, two things happen:
*The market notices early
*Drawdowns tend to be shallow and short-lived

Any temporary weakness attracts capital. Any pullback is quickly arbitraged away. That’s why great businesses almost never give you the emotional comfort of a “bargain” price. 𝐓𝐡𝐞 𝐦𝐚𝐫𝐤𝐞𝐭 𝐜𝐡𝐚𝐫𝐠𝐞𝐬 𝐚 𝐩𝐫𝐞𝐦𝐢𝐮𝐦 𝐟𝐨𝐫 𝐩𝐫𝐞𝐝𝐢𝐜𝐭𝐚𝐛𝐢𝐥𝐢𝐭𝐲, 𝐝𝐮𝐫𝐚𝐛𝐢𝐥𝐢𝐭𝐲, 𝐥𝐨𝐧𝐠 𝐫𝐞𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐫𝐮𝐧𝐰𝐚𝐲𝐬.

High returns on capital, long reinvestment runways and durable competitive advantages tend to be recognized early. The market charges a premium for that visibility, and it rarely gives investors the comfort of an obvious bargain.

That doesn’t mean valuation is irrelevant. It means valuation must be understood in context. Paying up for quality only works if the underlying assumptions hold. Those are returns on capital remain high, reinvestment continues to create value and growth proves durable. When those conditions are met, time becomes your greatest ally.

But this strategy also requires humility. In the end, the real question isn’t whether a stock looks cheap or expensive. It’s whether the business can keep compounding at high rates long after the initial purchase. If it can, the multiple you paid will matter far less than most investors think. And if it can’t, no valuation will save you.

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