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One thing that I find interesting that is related to the perceived demise of value investing as a technique is the transformation of business investment characteristics.

An issue I had with valuing Amazon is that they were "reinvesting cash flow" into the business for a long time to grow the business. But there were no profits to "reinvest". That is, saying it another way, it was hard for me to tease out investments that drove ongoing growth to "maintenance expenses" that were needed to just run the business.

Compare to an oil refinery or any other business whose basis is fixed assets. There would be a profit. You'd then take that profit and invest $500M in opening a new refinery that didn't exist before. It was directly clear that this was growth CAPEX and the new refinery would generate additional revenue. So the reinvestment was easier to tease out of the basic economics of the business. It would be in the companies interest to explain all of this and they often would break out growth projects from maintenance projects.

Contrast to a company investing a lot in IP or spending a lot on growth OPEX. It is often hard to divide it out (it shows up as increased R&D expense, and often COGS). Companies don't really want to share details of their budget for competitive reasons, so they aren't very transparent about these details other than qualitatively ("we are building our fulfillment network").

As the economy transforms further to an IP and service based economy this only grows worse as the universe of "old school" fixed asset-based companies becomes an ever smaller portion of the pile of options. Only Berkshire and Exxon in the top-10 of the Fortune 500 seem to me as these old school companies, and Berkshire has an asterisk because of its many special characteristics.

We (or at least I) as investors need to find ways to tease out growth OPEX/COGS from ongoing OPEX/COGS in evaluating companies for investment to apply Value Investing principles to them.

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