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What Can Investors Learn From John Malone?

John C. Malone, who was born on March 7 in 1941, is a billionaire American businessman. He is also a landowner and a philanthropist.

He served as the chief executive officer (CEO) of Tele-Communications Inc. (TCI), a cable and media giant, for twenty-four years from 1973 to 1996. Malone is now chairman of Liberty Media, Liberty Global, and Liberty Interactive.

As long-term investors, we know that compounding is probably one of the most important tools to amass wealth.

Most of us, for example, respect Warren Buffet who has compounded his wealth by 20% for about 60 years. By comparison, from 1973 to 1998, John Malone compounded TCI’s shares in excess of 30% annually.

How did he do it?

Below are a few key ideas that I have managed to extract from a book, namely “The Cable Cowboy”, about the telecom mogul. They are:

  1. Economy of scale
  2. Effective use of leverage, capital structure and tax strategies
  3. Lean operation
  4. Owner management
  5. Long term focus
  6. Local monopoly

As investors, we sometime look for companies called “compounders”. These types of company are rare, yet they have proven to be a path to long-term wealth building.

An example of this type of company is Berkshire Hathaway in the US and Markel in Canada. Using the above checklists, investors might be better equipped to identify these types of companies within, say, the Straits Times Index (SGX: ^STI)

But where do we start our search? We could start by looking at companies that are leaders or the main players in their respective fields.

For example, Wilmar International Limited (SGX: F34) in the food sector, CapitaLand Limited (SGX: C31) in property, SembCorp Industries (SGX: U96) in oil and gas, Singapore Telecommunications (SGX: Z74) in telecommunication and DBS Group (SGX: D05) in banking.

Then, using the above checklist, we can decide on which company could best fit into our long-term plan as a potential “compounder”.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.