Nuggets of Investing Wisdom

Nuggets of Investing Wisdom

A website for serious investors in common stocks

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free cash flow

Negative free cash flow can be desirable

  • by Rodney Smith
  • Posted on July 24, 2022July 24, 2022
  • Part 6: The Hallmarks of Superb Businesses

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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The best approach to choosing common stocks

  • by Rodney Smith
  • Posted on April 18, 2021April 21, 2021
  • Part 6: The Hallmarks of Superb Businesses

“If you can look into the seeds of time,
And say which grain will grow and which will not,
Speak then to me.”

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Heart of stock valuation: subtleties of free cash flow

  • by Rodney Smith
  • Posted on January 24, 2021January 24, 2021
  • Part 7: Building and Managing a Portfolio

If a company’s capital expenditures are simply maintaining the company’s position in its markets, it free cash flow may be unduly high

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What you need to know about bubbles

  • by Rodney Smith
  • Posted on September 13, 2020October 24, 2020
  • Part 5: Asset Management

I am not attuned to this market environment, and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.

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Financial strength – the debt equity ratio has serious shortcomings

  • by Rodney Smith
  • Posted on April 12, 2020March 21, 2021
  • Part 6: The Hallmarks of Superb Businesses

No company under consideration will even be close to scrambling to pay its creditors.

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The hunt for wonderful businesses

  • by Rodney Smith
  • Posted on November 3, 2019February 7, 2022
  • Part 6: The Hallmarks of Superb Businesses

Free cash flow yield can be a better indicator when return on capital (ROC) becomes a vanity metric that unduly flatters economic performance and management. We can charge management with the full cost of Economic Goodwill.

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Be wary of using Return on Capital (ROC)

  • by Rodney Smith
  • Posted on October 21, 2019November 22, 2020
  • Part 6: The Hallmarks of Superb Businesses

Superb companies produce a very high return on capital. But when substantial intangible assets don’t show up on balance sheets, the ROC numbers are unduly flattering to management.

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The under-performance of value stocks explained

  • by Rodney Smith
  • Posted on August 8, 2019January 15, 2021
  • Part 4: Principles of Operation

There is a lot of talk currently about the underperformance of value stocks compared with growth stocks over the last fifteen years. In fact, value investing has performed well against all other styles. This seeming contradiction comes from the fact that value investing and investing in value stocks are not the same thing.

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