The capital cycle framework provides three indicators for assessing businesses that may provide outsized returns on equity.
- Companies with low returns, but are in an industry settling into an oligopoly.
- High barriers to entry.
- Management that understands this and are acting to push the first two features further.
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Capital Cycle Purchase Candidates
Link Explanation: The linked note provides two types of businesses that are candidates for investment under the capital cycle framework. There is some cross over between these notes, however what the current note adds is that fact that management should be aware of the capital cycle, their own place in it, and be acting to intensify the qualities of the business and cycle that drive returns.