How to identify companies that make lots of money for shareholders
Economic performance focuses on effective use of the capital invested in the company
superb businesses
The awkward link between Buffett’s moats and ROIC – Part ll
A company that spends a lot of R&D dollars on intangibles of lasting value will have assets not shown on the balance sheet and ROIC will be artificially inflated. Such a company that is also acquisitive will show depressed ROIC because NOPAT will be reduces because the investments in intangibles of lasting value will be expensed and depress earnings and hence NOPAT.
Market (In)Efficiency and beating the market
Behavioral inefficiencies are likely the most enduring because human nature has not changed much over time and is unlikely to change much in the future.
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.
Moats, ROIC and the problematic Cost of Equity
If the CAPM is flawed, what can replace it? The best approach would be to assess whether companies in general and relatively speaking, the company in question, can raise money cheaply in public offerings.
Howard Marks bad advice or misunderstood
Now we are looking for good companies, not just cheap companies.
Buffett moats and the secret sauce of pricing power
Some companies are in the seemingly fortunate position that they can maintain profit margins simply by raising prices
The awkward link between Buffett’s moats and ROIC – Part l
Growth benefits investors only when the business in point can invest at incremental returns that are enticing
Looking behind Buffett’s moats at the forces that shape them
Asking ourselves questions in a simple framework based on Michael Porter’s five competitive forces allows us to understand what makes Warren Buffett’s moats work and where they are likely to break down.
Whether management loves money or loves the business
Management that unfailingly thinks and behaves like an owner of the business and has the courage and candor to discuss failures openly in reports to shareholders.
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