Archive for February, 2009
Are America’s banks really insolvent?
A lot of well respected economists have gone on record over the last few weeks and discussed the likelihood that our country’s financial institutions are all insolvent. Two particularly heavy hitters - Paul Krugman and Nouriel Roubini - have gone as far as to advocate nationalizations on a wide scale. It seems that just about everyone and their [...]
read more »Finding stocks with great management (part II)
In the first part of this series, I mentioned the importance of return on invested capital (ROIC) as a metric for how well a business’ management is allocating capital. Today, we’ll go through a few case studies for how ROIC can be used in your investment analysis. The three stocks I’ll use are Google (GOOG), [...]
read more »When investors don’t care about profits
I made the statement in a recent article that “value” does not always follow profitability. And, it was to some degree motivated by a recent article I read by Fred Wilson, a VC and blogger who I follow (and highly recommend). He recently posted an article on profitability which criticized to some degree the business model [...]
read more »Finding stocks with great management (Part I)
In my recent post on using free cash flows to see through GAAP income numbers, I touched on the difference between enterprise value and equity investing. When using enterprise value, you value a business based purely on its ability to generate free cash flow. Enterprise value investing presupposes that if you were to buy the [...]
read more »Looking past accounting tomfoolery
We hear it all the time, “Businesses are worth the net present value of future cash flows.” Usually a statement like this is followed by someone whipping out some convoluted discounted cash flow model. These models are usually based on free cash flow which is nearly always significantly different from the earnings or net income number reported [...]
read more »2008 Hedge Fund “Dear Investor” Letters
About two weeks ago, many hedge funds began releasing their end-of-year investor letters. In the spirit of Warren Buffet, who made the dear investor letter famous, these letters are usually insightful, humorous, and really interesting for non-professional investors. This year, it’s these letter might even provide some reassurance as many professionals were stung badly by [...]
read more »
