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
Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes
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 first step for investors is to come to a new understanding of reported earnings and the book value of equity.
“If you can look into the seeds of time,
And say which grain will grow and which will not,
Speak then to me.”
About forty years ago Buffett experienced a Damascene conversion
Economic performance focuses on effective use of the capital invested in the company
Some companies are in the seemingly fortunate position that they can maintain profit margins simply by raising prices.
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.
Book Value – Ain’t what it used to be – With the rise of company investment in intangibles, book value is losing its relevance.
Something over 80% of the market capitalization of the S&P 500 is made up of intangibles. Only a fraction of that appears on balance sheets.