Could you explain what this means? I don't understand your terminology
They always seek massive rent capture via outright purchase of a corp with a very large moat.
They always seek massive rent capture via outright purchase of a corp with a very large moat.
While this is always a tough strategy -- because the easier they are to find, the more likely these companies are to become overrated -- it gets a little easier when you have a massive amount of capital. It's still tough to do consistently though.
The term "Rent Capture" calls out the distinction between entrepreneurs and landlords. The worth of land is obvious and so it takes other competitive advantages besides ingenuity to close a big deal. Pejoratively, as dxbydy mentioned, "rent capture" implies that the owners don't have to work very hard for their money.
"a very large moat" refers to the barriers to entry. Imagine you have 4 or five companies who built power plants 40 years ago. It was expensive for them at the time, but they made back their initial investment years ago and now the only thing they care about is market share. The size of their moat is proportional to how much it would cost for some new company to build their own power plant.
I think you do :) Probably you disagree with the characterization. I don't see why rent capture generally has such a negative connotation outside of finance circles. Its a perfectly legitimate strategy. And who has a larger moat than BNSF or Vestas or SunPower ? Even if you were a Zuckerberg you couldn't build these things in decades. Takes forever just to buy the land, spec out these things & get the specs approved by regulatory bodies. So if you could buy these concerns outright, you would. You would buy, whether it was making solar power or your underwear. ( He owns the largest underwear maker Fruit of the Loom ). Given the asymmetric info advantage he has, he's sold millions of puts expiring in 2019 & is sitting on top of billions in premium ( while simultaneously telling the American public that derivatives are instruments of the devil :) Got to park those assets someplace, otherwise fiat risks accumulate. His stock purchases for 2012 are quite ho-hum...utilities, banks, big media ( http://static.cdn-seekingalpha.com/uploads/2012/12/4/sauploa... )
In other words, express your command of a subject by how simple you make it appear, not by demonstrating how impressive and complicated the subject is.
I remind myself of this concept routinely, and struggle to reflect it in my writing and peer communications.
Your first comment also dumbed down the exact same material - but in a different way. In the present day, among computer users and maybe people interested in finance, I have noticed the use of terser expressions, dense walls of text and shorter words to approximate the meaning of longer concepts (e.g. "moat", "sticky") to avoid recreating 2000+ word wikipedia articles.
Your first comment and the earlier commenter suggesting 'coca cola' having 'invented' santa claus (the user didn't mean the dictionary definition of invented), where two people are using language that has moved on from the dictionary definition, reminds me in some way of this essay by George Orwell.
https://www.mtholyoke.edu/acad/intrel/orwell46.htm
I prefer the present-day contracting "meaning concentrating" style of abuse of language rather than the olden-day expanding "meaning dilution" style of abuse, however both make for uncertain reading!
Well, it violates a lot of views of how the market "should" operate, on both the left and the right. On the right, some simplified versions of free-market views assume relatively perfect, efficient markets will normally develop absent government distortion, so they're suspicious of areas where rent is being extracted as probably due to some kind of intervention preventing a proper free market from operating. And on the left, many see rent-extraction as a paradigmatic example of the power of capital relative to labor (the ability of passive rent-extractors to in effect collect a "tax" from active economic activity).
He is simply finding companies with very high switching barriers that have occurred naturally in the market.
We usually associate "Rent Capture" with activities like limiting the amount of taxi licenses in a given city which helps incumbents but drives out competitors.
A moat protects your marketshare. A very large moat then would be, I guess (I'm not an investor or anything), a company with a large competitive advantage and a market share that would be very difficult to steal.
Fiat risk: inflation.
To paraphrase Silvio Gesell, an economist in favor of symbolic currency almost a century ago, "All the physical assets of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!"
ie: you don't need to buy whole companies outright to avoid saving in currency.
They've invested enormous sums in marketing sugary syrup, a product with a sizable margin. Others produce sugary, fizzy water too, but there's only one Coca Cola and it's impossible to overcome in the marketplace.