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Case studies of success in managing secular declining businesses?


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I noticed many value investors are drawn to secular declining businesses (myself included). We all like to buy things cheap but looking at the recent price drop of Outerwall, who owns Redbox, made me think- what is the end game (exit strategy) for declining businesses that investors are looking for?


I guess the typical answers are:

1) Big one-time dividend and/or hiking up dividends that return cash to stockholders over time

2) Exit by selling the entire business with a nice control premium

3) Market suddenly musters the courage to pay more than what you've paid (greater fool?)


Many are probably banking on option 3, given the management's disincentive of picking the first two. I'm not knocking on those who invest in secular declining businesses but I'm trying to understand the thinking behind those who invest in this part of the universe and whether there are case studies that demonstrate success?

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Theoretically: milk the cash cow then return capital to shareholders.


If management is great capital allocator (haha), then buy other businesses from cash flow (see Berkshire haha).

If management is not a great capital allocator, then divvie-and/or-share-buybacks (not getting into religious war here).


In practice, most managements diworsify or spend cash on crap (or on themselves - but then I'm repeating myself  ;D )


Weren't tobacco people one of the best in this? And even they bought some overpriced crap IIRC. Buffett (Berkshire haha) and Munger (DJCO) might be best at this. But obviously Buffett had other businesses and DJCO is study in progress ( I am not so sure it will ultimately end very well ).

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