Redistribution of Value via Capital Allocation: The goal of capital allocation, arguably management's most important task, is to put resources to their best use to create long-term value per share for ongoing shareholders.
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- The first part of capital allocation is investing in the business, including capital expenditures and intangible assets.
- The second part is transacting with mispriced securities, which introduces the potential for wealth transfers between stakeholders.
- Astute investors appropriately focus on a management's ability to invest in the business, but they should also pay attention to management actions with regard to buying and selling the company’s stock.