Compounders

This will be a demanding class meant for the student intent on entering the investment management industry post-graduation. As such, only students who demonstrate a compelling interest in professional investment management will be admitted, and admission will be limited to 12 students to ensure quality of experience for all involved. This seminar is not open to the bidding process and no auditors will be allowed. Please see the below for details on admittance. The key to equity wealth creation is hiding in plain sight. Since 1926, a mere four percent of stocks have generated all the wealth in the US stock market[1]. We call these unique companies “compounders.”[2] With the exception of a few magic market companies (Facebook, Google), the vast majority of compounders achieve this distinction in two acts. One product in one market, in most cases, is simply not enough to become a durable and sustainable large-cap company. A second act is usually an adjacent product or market. Think of Netflix transitioning from in-home DVD rental to streaming, or Grubhub moving from marketplace to first party delivery, or Vail Mountain Resorts translating its subscription season pass into an acquisition platform. Compounders is a class dedicated entirely to the exploration of these companies. We will start off with an examination of their core characteristics and life-cycle. We will then delve more deeply into four compounder patterns, illustrated with case studies and brought to life by the executives who led these companies to this rare distinction. Students will be paired with experienced investors and, over the course of the class, will study six recent compounders with the goal of extracting contemporary patterns that may help us to identify the future drivers of equity wealth creation. The goal of the class is to understand compounder patterns: what are the people, processes and systems that allow small companies to become durable and sustainable large companies over time?