Learning / Case library / Capital cycle
In a capital cycle, a boom draws capital in, the capital builds capacity, capacity outruns demand and prices fall. The skill is telling, early, whether new capital will earn a return or only add supply.
Numbers every case carries: capex against operating cash flow, capex against depreciation, revenue per dollar of fixed assets, return on invested capital, industry capacity added against demand growth.
A fibre builder spending about five times its operating cash flow. Filed numbers, then the reveal.
A fibre builder that outlasted the bust. What was different?
The supplier to the build-out. Where did the cycle reach it?
Buffett's own capital-sink case, from his letters.
Decades of capital in a business with little pricing power.
Repeated booms funded by outside capital.
Warehouses built ahead of proven demand.
Capacity built fast and then trimmed. Did demand catch up?
A capital-heavy business Berkshire chose to own. What made the returns?
Owned capacity against a broker. Filed numbers for one, estimates for the other.
The planned list is a working draft from memory. Each case is checked against filings before it is built, and some will be swapped.
Get new posts by email