This post is authored by MOI Global instructor Ser Jing Chong, portfolio manager and co-founder of Compounder Fund under Galilee Investment Management, based in Singapore.
Ser Jing is an instructor at Best Ideas 2022.
The following article has been excerpted from a letter to Compounder Fund investors.
In 2016, Michael Mauboussin co-wrote a research paper entitled The Base Rate Book. Mauboussin and his co-authors studied the sales growth rates for the top 1,000 global companies by market capitalization since 1950.
They found that it was rare for a company — even for ones with a low revenue base — to produce annualized revenue growth of 20% or more for ten years. For example, of all the companies that started with revenue of less than US$325 million (adjusted for inflation to 2015-dollars), only 18.1% had a ten-year annualized revenue growth rate of more than 20%. Of all the companies that started with inflation-adjusted revenue of between US$1.25 billion and US$2.0 billion, the self-same percentage was just 3.0%.
The table below shows the percentage of companies with different starting revenues that produced annualized revenue growth in excess of 20% for ten years. You can see that no company in the dataset that started with US$50 billion in inflation-adjusted revenue achieved this level of revenue-growth.
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About The Author: Ser Jing Chong
Ser Jing Chong graduated in 2012 from the National University of Singapore’s Engineering Science Programme. From January 2013 to October 2019, Ser Jing served in The Motley Fool Singapore as a writer as well as a co-leader of the investing team. One of his career highlights with Fool Singapore was to help its flagship investment newsletter, Stock Advisor Gold, outperform a global stock market benchmark by nearly 2x over a 3.5 year period. In mid-2020, he co-founded and launched Compounder Fund, a long-term focused global equities investment fund.
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