The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 12 • August 15 to August 31, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Investing Insight: Secular growth cycles offer enduring returns and long-term portfolio growth through ownership of high quality businesses.
- Action Step: Evaluate your portfolio for companies positioned in structural growth areas, while ensuring purchase prices reflect a good margin of safety.
Wealth Preservation: Even for outstanding businesses, paying too far above intrinsic value can erode future returns. Maintaining valuation discipline helps protect against downside risk.
- Strategic Positioning: Prioritize low-capital-intensity businesses with strong, defensible moats where scale, management quality, and capital allocation enhance business quality and long term returns.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
“Investing is simple, but not easy”
~Warren Buffett
“Everything should be made as simple as possible, but not simpler.”
~ Albert Einstein
In a world of instant news, market noise, geopolitical developments and endless “hot tips,” clear and disciplined equity investing principles are more important than ever. On the surface, investing can appear straightforward, buy good companies, hold them for the long term, and let compounding do the rest. But anyone who has invested through different market cycles knows it’s not that simple.
Successful equity investing is filled with nuances: understanding the quality of a business beyond its quarterly results, gauging the durability of its business model, and knowing what is the price to pay in order to align the risk-reward balance in your favor. The principles are easy to state, but applying them consistently requires patience, skill, and perspective.
That’s why, in this issue, we’ve distilled three core principles that guide our equity investing approach: identifying enduring secular supercycles, maintaining valuation discipline, and often favoring businesses with low capital intensity and strong capital allocation.
Secular Growth Runways:
There are always long-term, structural shifts in the economy, society, and technology that support steady growth for certain industries or companies over many years or even decades.
Unlike short-term market cycles, these structural trajectories create enduring tailwinds that help quality businesses grow revenue, strengthen competitive advantages, and reinvest in themselves at attractive rates of return.
Examples today include:
- Digital transformation to the Cloud
- AI enabled productivity
- Expansion of e-commerce
- Growing global connectivity and data usage
- Aging populations driving healthcare demand
- Genetics and protein folding revolution
- Digitalization and disintermediation of money and finance
- Robotics integration into the physical infrastructure
Some of the most effective investment strategies focus on businesses that leverage long term growth runways and have the ability to reinvest profits over many years. While these industries and companies create favorable conditions for high returns, they also attract competition and capital. This is where discipline in valuation and capital allocation are essential.
These runways provide:
- A higher probability for longer earnings growth, with an ability to ride out business cycles.
- Opportunities for companies to keep strengthening their competitive fitness by investing scale, brand, technology or network effects.
- Greater resilience to industry disruptions or market volatility.
For example, Peter Lynch in his wonderful book – One Up on Wall Street, described how he invested in Taco Bell by identifying a secular shift toward quick and affordable dining. He saw that this trend was likely to last for decades, driven by lifestyle and demographic changes. Taco Bell’s scalable and franchise-heavy model allowed it to grow rapidly without massive capital investments.
Key questions when evaluating secular runways:
1. What are the primary drivers?
Is the trend driven by demographic shifts, evolving consumption patterns, technological breakthroughs, regulatory changes, or a combination of these? What has changed in society that was not the case a few years ago?
2. Where are we in the trend’s lifecycle?
Is this the early acceleration phase, a period of sustained growth, or approaching maturity, when growth slows and competition intensifies?
3. Is it supported by government initiatives?
If so, what form does this support take, policy targets, subsidies, tax incentives, or infrastructure spending, and how durable is it likely to be? For example, a declared national commitment to renewable energy by a set year can support multi-decade investment cycles.
4. Is capital flowing into that industry?
Are there deep funding pools or specialized investment vehicles (ETFs, sector funds, PE/VC activity) enabling companies in the sector to raise growth capital efficiently?
Bottom line: Industries or sectors that have long growth paths can often be ideal hunting grounds for stock picking, but it is extremely important to analyze individual businesses and check for competitive advantages, capable leadership, and managements with integrity.
Avoid Overpaying:
One of the clearest advantages you can give yourself as an investor is also one of the simplest to articulate: never overpay.
While the investment literature is littered with maxims instructing us to pay for a business below its fair or intrinsic value, we like to follow Charlie Munger when he says – “Invert, Always Invert”
This translates to ensuring we don’t overpay for a business, or do not pay more than the actual fundamental worth of the business.
Think about this: markets are inherently uncertain and a lot of things are never in our control including interest rate changes, geopolitical events, or quarterly earnings results.
But there are aspects of investing where we do have agency. One of the most difficult behaviours to adhere to in investing is having the discipline to only invest at the right price. This provides investors a clear margin of safety between a company’s true value and the price they pay for it.
This margin of safety is baked in automatically when we don’t overpay for a stock. It allows us multiple advantages including
Room for error in our estimates of business value
A shock buffer against unexpected market volatility
Protection from company-specific setbacks
The peace of mind to be longer term holder of our stocks, which significantly enhances the probability of success.
This principle is best leveraged during volatile market downturns. Falling prices during such times often produce bargains and opportunities to invest for the long term.
As Michael Mauboussin, Head of Consilient Research, has explained, markets reward those who weigh probabilities and payoffs dispassionately, rather than reacting to headlines. Buying a great business is only part of the equation, paying the right price is what increases your likelihood of success.
A Practical Tool to Decide if the Price Is Right
1. Estimate the potential outcomes — for example:
Big winner: +200% gain (10% probability)
Minor success: +50% gain (20% probability)
Break even: 0% return (40% probability)
Small loss: –20% (20% probability)
Total loss: –100% (10% probability)
2. Multiply each payoff by its probability to determine its contribution to the expected value.
3. Sum the results. This weighted average return helps you see if the investment is priced to create value over time.
This process is called probability weighted expected value and forces disciplined analysis. Even a world-class company can be a poor investment if the entry price is too high relative to the expected value it offers today. Moreover, the lower your price point, the longer your time horizon and the more patient you can naturally be. That margin of safety protects your capital, while giving you the patience to allow business fundamentals to work in your favour.
Key Habits of the Valuation-Disciplined Investor:
Businesses with Low Capital Intensity:
Some of the best long-term investments are in businesses that can grow without heavy investment in fixed assets. Warren Buffett has often noted that a truly great business is one that can grow while using minimal additional capital. A company can return more earnings to its owners or reinvest them in high-return opportunities when it has lower maintenance and capital costs.
Many of Buffett’s most successful holdings, such as See’s Candies, Moody’s, and Coca-Cola, share this trait: they can expand earnings without committing significant amounts of capital in new factories or equipment while actively returning capital to shareholders in the form of buybacks or dividends.
Low-capital-intensity business models help companies to:
Spend less on fixed assets including avoiding large investments in property, plants, or equipment
Preserve more capital for growth or returns by keeping more cash available for new products, acquisitions, or shareholder distributions
Adapt more easily by having the agility to adjust to market changes or scaling operations more cleanly without large cost overruns or cost commitments
Allocate capital to higher-return opportunities including reinvestments, acquisitions, and shareholder distributions in a manner that best creates long-term value
Before deciding whether a business is low or high capital intensity, it’s important to understand it in conjunction with the company’s long term goals and corporate strategy. Looking only at capital intensity can give a narrow view and may lead to incomplete conclusions.
A notable example is Amazon in its early days. Because it sold products, many directly compared it with Walmart. On the surface, both were retailers, but the business models were very different. Amazon operated with much lower operating margins but also much lower capital intensity than Walmart. The more useful comparison was not just about retail sales, but about understanding the structure, strategy, and long-term potential of Amazon’s business model.
While capital-heavy industries may have strong barriers to entry, low-capital-intensity businesses often excel at scalability and adaptability. Many successful companies today use technology, outsourcing, and intellectual property to keep their asset base light while still growing quickly.
Bottom line: Low capital intensity can help a business grow faster especially if their competitive advantage strengthens with scale.
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
Gain Industry – Level Intelligence For Your Investment Strategy
Transform your approach to wealth building with institutional-grade insights. Schedule a private discovery call with Ken and the Ridgewood team to:
- Analyze your current portfolio positioning
- Explore sophisticated investment opportunities
- Design your personalized wealth architecture
Building generational wealth requires institutional-grade thinking. Let’s discuss how our sophisticated approach can work for your family’s future.
Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.
