Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Thursday, 14 November 2024
Monday, 4 November 2024
Have an obsession for cash flow conversion. What is the free cash flow of the company?
Charlie Munger: If you take a business that is a GOOD business but not a fabulous (GREAT) business, they tend to fall into TWO categories:
One is the business where the whole reported profit just sits there in surplus cash at the end of the year and you can take it out of the business and the business will do just as well without it, as it would if it stayed in the business
The second business is one that reports the 12% (return) on capital but there's never any cash. (This) reminds me of the used construction equipment business of my old friend John Anderson and he used to say in my business every year you make a profit and there it is, sitting in the yard. There are awful of businesses like that where just to keep going (and) to stay in place, there is never any cash. Now that business doesn't enable headquarters to drag out a lot of cash and invest it elsewhere. We hate that kind of a business. Don't you think that is a fair statement?
Warren Buffett: Yeah, that is a fair statement.
https://www.facebook.com/reel/507646045755285
Summary:
2 types of Good Businesses:
One that generates a lot of free cash flows; you can take this cash out of the business and the business will just do as well without it.
One that generates little or no free cash flows, as it requires a lot of working capital or capex to maintain and sustain its business.