A timely reminder to be disciplined about the businesses in your corporate portfolio – especially now there may be tempting bargains to be picked up at apparently bargain prices. Simply investing cash flow in ‘attractive’ businesses is not good enough. The value generally goes to the owners of the business being bought. The rule is that ‘2 + 2 = 5’ … i.e. the business must be worth more in our ownership than on its own or owned by others. And no, that does not mean higher profitability, but stronger growth in free cash flows.
The same discipline needs to be applied to activities already owned, of course, though now may not be the best time to try off-loading businesses that don’t fit.