Amidst the geopolitical and macro turmoil, we take a step back this week to turn back to how companies can think about outperformance through all the volatility. One can’t be frozen and simply wait for a calmer or better time to materialize. No one should be sitting around waiting for an easy bull market to emerge.
Long-time Super-Spiked subscribers will know that we are long-running advocates for companies focusing on profitability and a fortress balance sheet. This week we will start the process of spending some time on the “G” word: growth. Growth became a 4-letter word for investors after the surge in CAPEX during the Super-Spike era and subsequent US shale boom led to profitless growth—something we have spent a lot of time discussing in prior posts.
And let us be clear, profits and balance sheet health remain the priority. That said, there is no doubt investors will always side with companies that can grow versus those that cannot grow at a given level of profitability and balance sheet strength. The trick is to hit the trifecta: growth, returns, and balance sheet strength. Moreover, for especially the upstream portion of the industry where asset life is finite—oil and gas fields naturally deplete—it is critical to adequately reinvest back in the business if a company is to persist as a going concern.