Cash flow absurdity and Warren Buffett’s Owner Earnings
Most analysts will talk of EBITDA, EBIT, NOPAT and what not. Warren Buffett’s approach is to think in terms of Owner Earnings. It is somewhat akin to free cash flow.
financial statements
Income Statements and Balance Sheets have largely lost their relevance for investors
The way things are, the only numbers of use to an investor from a Balance Sheet relate to debt. The expensing of investments in intangibles of lasting value creates a distortion that completely undermines the use of the Income Statement. Reported earnings are not only useless for investors but also misleading for the unwary.
Is it a good time to lighten up on stocks?
If the job has been correctly done when a common stock is purchased, the time to sell it is – almost never.
Problems with the most popular indicator of superb companies
From its growing operating cash flow, it is able to fund growing capital spending and also fund growing R&D expenditures. Of note, it seems to be able to maintain and even improve its operating margins. It is easily able to fund the capex needed to maintain it long-term competitive position in its various markets. It is also easily able to fund the capex it chooses to make to grow the company and fund healthy R&D expenditures.
Value investing in the age of the Magnificent Seven, networks, intangibles, AI and all that
A high ratio of price to book value, a high price-earnings ratio, and a low dividend yield – are in no way inconsistent with a ‘value’ purchase.
Numbers, financial statements and things that can be counted but may not count
You know, Skippy, if all this bad stuff hadn’t happened, we would be having a pretty good quarter.
The intelligence of successful investors
The mistake many make is to think investing is only about numbers. We invest in businesses, not in financial statements.
Investment decision making in face of uncertainty
Robust decision-making embraces many plausible futures, then helps analysts and decision makers identify near-term actions that are robust across a very wide range of futures
The Achilles heel of the quantitative analysis of stocks
Something that knocks the pins out from our normal understanding of price earnings ratios, return on invested capital, discounted cash flow analysis, smart beta/factor ETFs, value at risk models (VAR) and even company financial statements
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