4 Comments

I think you're pointing to an important lesson: Investing is messy because trying to predict the future is a soup consisting of a ton of ingredients. In a delicious soup it's hard to say exactly what ingredient is the root cause for the deliciousness.

But I think you're taking it a bit to far to say the many pieces leading to higher value is not the cause of the higher value.

In a delicious soup, it would not be wrong to say that the chicken broth is the cause of the great taste, but so was the carrot, the thyme and also the water.

What I'm trying to point at is that (as you rightly point to) there's a bunch of stuff that is the cause of higher future value. And I think that done right, inside ownership is one of those contributing to a higher future value. But it is not a guarantee against mismanagement (nobody wants to fail at their job).

Thank you for a thought-provoking piece πŸ™Œ

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Marvelous piece! I usually see insider ownership as 'nice to have'. In my case, whether that ratio is 30% or 7% it doesn't shift much... but I do like to see it above 0-1%. It would be interesting to plot a similar performance chart within Russell, with 2 groups: below 0.50% I.O. vs above 5% I.O. (threshold to be defined). Anyhow, love the analogies and all the accurate reflections πŸ‘πŸ»

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Insider ownership needs to be done right. Listen to this podcast if you want to understand what I mean https://rockandturner.substack.com/p/podcast-serious-bleed-on-capital

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What about the results of founder led businesses with a high ownership? Usually these types of businesses are a lifes work/passion. I would give these businesses a higher rating than simply a high ownership or even a family led business as it could be two generations on from the true founder.

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