Is anyone interested in discussing big-dividend-paying, bluechip players that have successfully invested in startup exponential organizations? (Reference point: https://www.cnbc.com/2015/06/01/the-top-100-exponential-companies-who-are-they.html .)
Following your original link, here is a vijeo of an interview of Salim Ismail: Top 10 exponential companies (cnbc.com) And here is an article, The Secrets of Unicorn Companies And the 100 Most Scalable Organizations that lists the 100 companies: The Secrets of Unicorn Companies. Here are the 100 companies who totally… | by Salim Ismail | Backchannel | Medium
I will opine that exponential growth is better than growth multiple. For example, squaring my money is preferable to doubling it. Further, higher exponents are better than lower exponents. For example, cubing my money is better than squaring it.
OK, now that I've mocked this idea, I will offer something more tangible that no one will be interested in. A business that grows exponentially, Tesla for example, will also have an exponential need for money. Such a business is going to IPO the hell out of the market to keep their debt under control. The same can be said of other companies like REITs, industrials, etc. In these cases, a company can dilute their issue more, less, or equal to the rate of expansion. Typically, the bigger the company, the more fantasy can creep into the balance sheet so the more easily they can pretend to have higher enterprise value than is factual. I offer GE as an example. It's a bit of a knife edge. The key, I would offer, is going to come down to the honesty of management. At least, for a value investor. Value investors look for increasing value. That comes down to P/E, primarily, but is a larger set of interests than that. Examining value gains based on the books is made difficult by hideous legislation that allows companies to compensate their executives off the books. Stock options for executives are documented in the notes of a balance sheet, not in the sheet itself. The argument is "they are exposed" but they are not accounted and you have to dig deeply to find them, by design. I look for honesty by looking at executive compensation in 2008 and 2020 (if 2020 was difficult for the specific industry). Did they set a record when times were tough for shareholders? To learn this, balance sheets must be read, including the notes. If so, you have some executives who are working for their own benefit and not for the shareholders. Those guys are going to milk the equity market as much as possible to further their own interests, instead of building value. In the case of an honest management, there are big opportunities for growth. REITs, for example. I owned a REIT that bought a huge amount of Brazilian RE in 2008/2009. By 2010, the value of that RE had doubled. By 2011, it had nearly doubled again. Using this new leverage, the REIT went from a 600M corporation to over 2B in four years with no IPOs. Most corporate executives would have IPOed the hell out of that capital gain. For students of history, we are on the cusp of another fantastic inflationary opportunity. REITs will perform poorly in the short run but have an opportunity to perform extremely well in the medium to long run, as long as value gains are not IPOed into oblivion. Software companies are the only companies that scale nearly perfectly during an inflationary period. They are a different discussion with their own set of problems but I expect the short term to be a good era for software companies.
I just realized the above response sounds off topic. It is not. What do I care about a company growing in size? I do not and nor should anyone. I care about share value growth. As an owner, I deserve to reap the benefit of corporate gains. If a company doubles in value but also doubles the equity issue, that does not benefit the stock holders at all but you can be sure the executives will take massive bonuses for a job well done. This, specifically, is the issue I fixate on when looking for value.
