Wall Street Wheel of Fortune

Investment methods across the capital cycle

Capital Returns: Investing Through the Capital Cycle : A Money Manager’s Reports 2002-15

When the market becomes increasingly difficult to predict, instead of insisting on guessing “unknown” demand,
it is better to grasp the “known” supply that is easier to determine – that is, “changes in the capital cycle”;
this book helps investors analyze company (target) competition The strength lies in how to be affected by supply changes in the industry,
to look for risks in optimism, to wait for opportunities in pessimism, to avoid being a fool, and to pursue maximizing capital returns.

Break the myth of the dichotomy between value stocks and growth stocks,
identify market reversal signals, and bet against the trend!

The author of this book is Edward. Qian Sile was hailed as “one of the greatest financial historians of our time” by “Fortune” magazine. He observed that Marathon Asset Management, with more than 20 billion US dollars in assets under management, can always achieve success no matter how the market changes. Maintain high performance.

Marathon Asset Management writes eight letters/Global Investment Reviews (Global Investment Review) to investors every year, expressing their views on the market and stocks. In order to find out how they maintain maximum capital returns, Qian Sile collected and analyzed the company’s most insightful reports. He found that the biggest difference between them and the investing public was that they focused more on the “known” level that is easily accessible – —Focus on the supply side rather than the demand side, observe capital flows and the environment of the company, determine the competitiveness of the company more pragmatically, break the dichotomy myth between value investment and investment in growth targets, and strive to find out from growth targets Potential growth stocks that are more likely to be held for the long term.

This book also uses real cases from different industries around the world, including beer manufacturing to semiconductors, to illustrate that capital cycle strategies can be effective under different market conditions.

Marathon Asset Management calls this investment method “Capital Cycle Analysis” and lists six rules.
Taking you through the capital cycle and entering and exiting any industry can effectively amplify capital returns:

1. Focus on supply, not demand.
Capital cycle analysis focuses on supply rather than demand. The outlook for supply is not as uncertain as demand, so it is easier to predict.

2. Observe capital flows and pragmatically analyze corporate competitiveness.
Stop falling into the myth of the value/growth dichotomy. In industries supported by the supply side, it is reasonable for companies to have high evaluations. In addition, gathering many IPO companies in an industry is a very dangerous sign, as are capital increases, stock issuances, and debt increases.

3. Be careful with investment bankers.
Investment bankers will promote the capital cycle and will harm the interests of investors to a great extent.

4. Choose the right business managers:
Management’s capital allocation skills are most important, and meeting with management can often yield valuable insights.

5. Generalists will make better capital cycle analysts
Generalists are less likely to make the mistake of “ignoring the reference group” and will be better at taking an “outside view” and leveraging cross-industry capital cycle dynamics to develop investment strategies.

6. Adopt a long-term approach
Long-term investors are more suitable to apply the capital cycle method. Because the capital cycle of an industry takes a long time to end. If you can have long-term investment discipline and a relatively low portfolio turnover rate, you are well suited to apply the capital cycle approach.

It should be noted that investment is inevitably accompanied by risks, and there are moments when the capital cycle fails. Pay special attention to these two signs: once policymakers intervene in the capital cycle, the market liquidation process may stop; new technologies may also disrupt the normal operation of the capital cycle. You can respond early and minimize risks.

In an era of uncertainty with frequent signs of economic bubbles and bursts,
it is even more necessary to master “known” information and grasp the best time to enter and exit the market.

About the author

Edward. Edward Chancellor

Graduated from Trinity College, Cambridge, with first-class honors in modern history, and later obtained a master’s degree in philosophy in modern history from St. Antony’s College, Oxford. He is a financial historian and writer, known for his profound market insights. Known for its strength and historical analysis. “Fortune” magazine once called Qian Sile one of the greatest financial historians of our time.

Qian Sile has extensive financial experience as an investment banker and hedge fund strategist. His insights into capital cycles span multiple industries, from beer manufacturing to semiconductors, and his analysis covers different market conditions around the world. “Financial Analysts Magazine” also praised him as “one of the greatest financial writers of our time” and especially praised his early warning analysis of the three major economic bubbles.

His works have been recognized by all walks of life. Qian Sile’s work “A History of Financial Speculation” is hailed as a fascinating description of financial mania, showing a deep understanding of financial markets. The book was shortlisted for the New York Times’ annual book selection; his other This important book, A Moment of Credit Crisis? ” analyzed the credit boom in the United States and the United Kingdom and warned about credit bubbles; and his 2022 book “The Price of Time: The True Story of Interest” criticized the central bank for continuously lowering interest rates and resorting to quantitative easing policies. Asset price inflation promotes economic growth. Because two early books warned that the dot-com bubble and the credit bubble would eventually burst, financial writer Felix Martin said that this book will be a “timely warning” to the follies of central banks. The book was selected by the Financial Times for 2022 Business Book Award List.

Marathon Asset Management, the company analyzed by the author in this book, was founded in 1998 and focuses on global credit markets and real estate-related markets. Marathon’s core decision-makers are only a dozen people, but they can manage more than 20 billion US dollars in assets. In 2009, they were selected by the U.S. Department of the Treasury as one of nine managers to manage Public-Private Investment Plan (PPIP) assets. Their investment portfolio includes major investments in companies such as Oracle, J&J, Autodesk, the major software provider for 3D architectural design in the United States, and Merck & Co., one of the world’s largest pharmaceutical companies. These investments demonstrate Marathon’s ability and foresight to understand complex aggregate markets.