Making sense of free cash flow numbers
To understand how a company can lose $256 million in reported earnings in 2020 and yet show FCF that year of $491 million you need to read and understand the company’s cash flow statement.
Part 6: The Hallmarks of Superb Businesses
Concentration risk and the Magnificent Seven
The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return
Back to basics about free cash flow
Accounting is but an aid to business thinking, never a substitute for it
Intangibles and a new model of capitalism
Have a good read while we are away on holiday for a few weeks
Tapping into the wealth created by stock market investing
The vast majority of wealth creation comes from a reasonably sized cohort of successful companies. The trick is to identify these wonderful businesses.
How to distinguish a superb value creator from an also ran
The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return
Banks’ reported returns on tangible common equity are a con game
JPMorgan Chase reported strong results in the fourth quarter as we earned $11.0 billion in net income…and an ROTCE of 20%
Buffett’s concept of economic goodwill vs accounting goodwill
Sunkenness – intangible investments tend to be worth less if they go wrong
A business plan that depends on leverage
Mortgages on income properties will permanently reset to a higher level
Negative free cash flow can be desirable
Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes
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