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
return on invested capital
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 best approach to choosing common stocks
“If you can look into the seeds of time,
And say which grain will grow and which will not,
Speak then to me.”
Stock valuation in an age of intangible assets
About forty years ago Buffett experienced a Damascene conversion
How to identify companies that make lots of money for shareholders
Economic performance focuses on effective use of the capital invested in the company
How to identify great companies to invest in – Part ll
Some companies are in the seemingly fortunate position that they can maintain profit margins simply by raising prices.
Be wary of using Return on Capital (ROC)
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.
The fading usefulness of book value
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.
You must be logged in to post a comment.