The best book Warren Buffett has ever read?
The Outsiders.
Here's everything you need to know:
The Outsiders.
Here's everything you need to know:
Capital allocation is the most important task of management.
The Outsiders covers 8 CEOs who did an excellent job in this.
An investment of $10,000 would be worth $1.5 million (!) 20 years later if you invested with these excellent CEOs.
The Outsiders covers 8 CEOs who did an excellent job in this.
An investment of $10,000 would be worth $1.5 million (!) 20 years later if you invested with these excellent CEOs.
The best CEOs invest in projects that yield the highest return with the lowest possible risk.
Here's everything you need to know about the subject (H/T @safalniveshak):
Here's everything you need to know about the subject (H/T @safalniveshak):
A CEO’s overall performance depends on doing two things well:
1️⃣ Running operations efficiently
2️⃣ Effectively redeploying cash from operations
That's it.
1️⃣ Running operations efficiently
2️⃣ Effectively redeploying cash from operations
That's it.
Most CEOs focus solely on running their operations efficiently while neglecting capital allocation.
Outsider CEOs focus much more on capital allocation, which isn’t widely taught in business schools.
Outsider CEOs focus much more on capital allocation, which isn’t widely taught in business schools.
Here are 4 CRUCIAL things you should remember from the book:
1️⃣ Focus on intrinsic value per share
Most CEOs make poor acquisitions or pay high dividends which are in their own interest.
This destroys value for shareholders.
1️⃣ Focus on intrinsic value per share
Most CEOs make poor acquisitions or pay high dividends which are in their own interest.
This destroys value for shareholders.
Outsider CEOs do the opposite: they allocate capital in a way that maximizes shareholder value.
Think about the following:
📌 Organic growth investments
📌 Share buybacks
📌 Value accretive acquisitions
📌 Paying down debt
Think about the following:
📌 Organic growth investments
📌 Share buybacks
📌 Value accretive acquisitions
📌 Paying down debt
2️⃣ Independent thinkers
It's impossible to outperform the market if you do the same as everyone else.
The same goes for CEOs.
Outsider CEOs think independently and love the process. Their company is like a baby for them.
It's impossible to outperform the market if you do the same as everyone else.
The same goes for CEOs.
Outsider CEOs think independently and love the process. Their company is like a baby for them.
One great example of independent thinking is Henry Singleton from Teledyne.
In the 1960s, Teledyne acquired many companies when valuation multiples were attractive.
In the 1960s, Teledyne acquired many companies when valuation multiples were attractive.
Then in the 1970s, Teledyne’s stock got cheap, and Singleton repurchased over 90% of shares outstanding.
Both of these moves were very unconventional.
When the market zigged, Outsider CEOs would zag.
Both of these moves were very unconventional.
When the market zigged, Outsider CEOs would zag.
3️⃣ Patience
Outsider CEOs are extremely patient. They aren’t in a hurry to put capital to work when there are no attractive opportunities.
For example, Warren Buffett would go years piling up cash for Berkshire Hathaway, waiting to jump on the next opportunity.
Outsider CEOs are extremely patient. They aren’t in a hurry to put capital to work when there are no attractive opportunities.
For example, Warren Buffett would go years piling up cash for Berkshire Hathaway, waiting to jump on the next opportunity.
When fantastic opportunities were presented to Buffett, he wasn’t afraid to bet big when the odds were heavily in his favor.
Buffett knew that the next great opportunity would eventually come around.
Buffett knew that the next great opportunity would eventually come around.
4️⃣ Humility
Outsider CEOs are very humble
When most people think of a successful CEO, they think of a charismatic leader that loves being in the spotlight...
Outsider CEOs are very humble
When most people think of a successful CEO, they think of a charismatic leader that loves being in the spotlight...
... All of the Outsider CEOs are the exact opposite of this.
They’re very humble, private, and focused on doing their job well.
Outsider CEOs let the shareholder’s returns speak for themselves.
They’re very humble, private, and focused on doing their job well.
Outsider CEOs let the shareholder’s returns speak for themselves.
This thread was made by my great friend @Clay_Finck from @WSM_TIP.
If you’d like to learn more about The Outsiders, we highly recommend you check out TIP's latest podcast covering it in detail: link.chtbl.com
If you’d like to learn more about The Outsiders, we highly recommend you check out TIP's latest podcast covering it in detail: link.chtbl.com
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