Intangibles and a new model of capitalism
Have a good read while we are away on holiday for a few weeks
Part 6: The Hallmarks of Superb Businesses
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
Profound errors in interpreting and using ROE and ROC
I find it better to analyze a company’s cash flows, maintenance capex, growth capex and free cash flow in real dollar terms and measure them against the true value of the capital management has use of
The emergence of a new model of capitalism
The first step for investors is to come to a new understanding of reported earnings and the book value of equity.
The danger of investing in companies in an oligopoly
A slowdown in business dynamism means that entrenched firms have less to fear from upstarts
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