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2016-04-29

  • batbeer2 commented on Mitchell Mauer's article 04-29 10:54
    Who Was Ben Graham?
    (This article appeared first on The Stock Market Blueprint Blog.) History has designated Benjamin Graham as the "father of value investing." He not...
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    batbeer2 04-29 11:54
    • >> Graham was the first to base investment decisions on companies’ financial statements....

      How do you know this?

       

       

2016-04-24

  • batbeer2 commented on Vera's article 04-24 04:51
    New Feature Announcement: Warren Buffett’s Owner Earnings Per Share
    In the 1986 Berkshire Hathaway shareholder letter, Warren Buffett (Trades, Portfolio) defined owner earnings as follows: "These represent (a)...
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    batbeer2 04-24 05:51
    • Very interesting, thanks! 

      I think this might work for some companies and may be dangerous when used with others.

      Take Wanlmart. A huge part of its "capex" is the increase in inventory as it grows. Accountants will say inventory is a current asset. However, for a retailer (not in liquidation), inventory is very much a fixed asset. The retailer will forever have cans of soup sitting on its shelves. When they open new shops, someone will have to pay for the extra inventory. In my book that growth capex but under GAAP, accountants disagree. 

      Accountants can disagree but the reality is that the inventory in a given Walmart shop is worth more than the building.

      For this and other reasons, I suppose the above approach is best used on companies with very significant fixed assets to total assets. The formula will be less meaningful for a company like Car Mart with huge inventory relative to its fixed assets. Or a bank.

      Conversely, the results will be a bit more meaningful for a comapany with significant fixed assets to total assets. Union Pacific and electric utilities come to mind. 

      In practice I suggest adding a filter or perhaps warning sign for companies with relatively low fixed assets to total assets (banks and some retailers) when presenting the results for a given company.

      Just some thoughts.

2016-04-19

  • batbeer2 commented on Mitchell Mauer's article 04-19 12:00
    Crossing Your Fingers: The Best Way to Identify Stocks With Competitive Advantages
    When selecting a long-term stock investment, most investors take a page out of Warren Buffett (Trades, Portfolio)’s playbook and look for companies...
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    batbeer2 04-19 13:00
    • >> The Wright Brothers and Henry Ford both did a pretty good job at that.

      Fair point! 

      Then again, Union Pacific was around before there were cars and I'd be willing to bet they will be around after the last "normal" car has been produced.

      In any case, I think it will be hard to go back to 1916 and pick a car stock or airline stock that has done better than Union Pacific over that timeframe. A moat does not mean no one will attack you. It just means you have a much better chance of standing your ground.

       

2012-04-22

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