What if we make the link that people drive good business and then we got the (in)famous bottom line “E” so we finally have our estimated multiple? Then, value investing is all about people and corporate culture after all! Have you thought of that?
I first heard of Henry Singleton, CEO of Teledyne by reading The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, which shares the stories of great capital allocators of all times. Then, I received this presentation about him presented by Leon Cooperman from Omega Advisors in the Value Investing Congress of 2007.
Singleton was able to buy over 100 companies in the “Conglomerate Era” and then, in the ’80s, reaped the benefit of shrinking the total share count from 40 million to 12 million shares, without using debt, at low multiples.
His entire strategy used very little debt, with return on assets being very close to return on equity (ten-year ROA of 18,1% versus ten-year ROE of 19,3%). Despite not being a MBA student, he taught us a outstanding class on financial engineering.