The hidden compounding engine

At its core, investing is about solving a deceptively simple puzzle: finding businesses that can grow consistently for years while ensuring you don’t overpay for that growth. Yet for all the complex models and valuation frameworks that populate investment textbooks, surprisingly few connect these two essential elements elegantly. This month’s cover story delves into the most illuminating equation in investing – one that combines both ROCE and reinvestment rate into one. After all, in the long run, these two are at the core of any compounding machine The beauty of this equation is its clarity: just like a Formula 1 car needs both engine power and aerodynamics, great investments need high returns and smart reinvestment. W