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COMPANY LIFECYCLES
It is useful to think of companies as having a lifecycle
1. STARTUP
- these companies historically were rarely listed on the stock exchange
- they need Cash and are highly risky
1/11
It is useful to think of companies as having a lifecycle
1. STARTUP
- these companies historically were rarely listed on the stock exchange
- they need Cash and are highly risky
1/11
- almost everything about them is unclear even if their plans are loudly stated
- best for regular investors to avoid and leave them to specialized experts who can help guide them through those uncertain early days
2/11
- best for regular investors to avoid and leave them to specialized experts who can help guide them through those uncertain early days
2/11
2. EARLY GROWTH like Tesla after its IPO
- consuming Cash and generally spending capital that builds up over time
- investing at this time is real Equity Investing
- and success can be enormously rewarding like 100x
3/11
- consuming Cash and generally spending capital that builds up over time
- investing at this time is real Equity Investing
- and success can be enormously rewarding like 100x
3/11
- but it is typically NOT necessary to invest at the IPO
- patiently watching to see the real progress of the business Model will often allow a better Entry Point a few years in before the next stage starts to take real effect
4/11
- patiently watching to see the real progress of the business Model will often allow a better Entry Point a few years in before the next stage starts to take real effect
4/11
3. STRONG GROWTH ramp where the numbers start to become substantial like Tesla from 2018~2021
- consuming Cash and generally spending capital that builds up over time
- but Operating Cash Flow may now be starting to turn meaningfully positive
5/11
- consuming Cash and generally spending capital that builds up over time
- but Operating Cash Flow may now be starting to turn meaningfully positive
5/11
- investing at this time is real Equity Investing
- and success can be very rewarding like 10x as you can see in my analyses
6/11
- and success can be very rewarding like 10x as you can see in my analyses
6/11
4. LATE GROWTH and beginning of transition into MATURITY like Tesla MAY be in 2031 or APPL probably is today in 2020
- Free Cash Flow is very positive and the successful company often has more Cash than it knows what to do with
7/11
- Free Cash Flow is very positive and the successful company often has more Cash than it knows what to do with
7/11
- these are conditions that Bond Investors like but the successful company really does not need that kind of borrowed money
- dividends are likely to have started
8/11
- dividends are likely to have started
8/11
- and depending on the business prospects the company may be buying back its shares i.e. returning their capital to its shareholders
9/11
9/11
- sometimes the shares of these companies really start to look like Equivalent Bonds because they are effectively giving both income and capital back to their investors
10/11
10/11
5. LATE MATURITY and DECLINE like GE today . . .
- not a good time to be associated with companies that get into this condition
11/11
- not a good time to be associated with companies that get into this condition
11/11
