myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

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.

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Tuesday, 28 May 2024

High capex companies are usually bad investments as they rarely produce enough free cash flow

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Supermarket companies, in general have consistently spent more on capex than depreciation and produced very low free cash flow per share ...

How depreciation of assets can distort profit figures

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Depreciation is an expense that matches the cost of a fixed asset against the revenues it helps to produce.  The cost of an asset is spread...
Monday, 27 May 2024

Looking for possible investment candidates: Four simple rules when comparing FCFps with EPS

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  Summary Expenses and depreciation reduce profits.  Capex reduces FCF. When expenses are not expensed against revenues but considered as ca...

If free cash flow per share is consistently a lot lower than EPS, this is a warning sign.

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 The 2 main reasons for FCF being lower than a company's EPS are: 1.  Poor operating cash conversion 2.  High levels of investment in ne...

Quality companies turn most of their profits into free cash flow on a regular basis

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We can use free cash flow as a tool for checking the quality of a company's profits. The stock market has been littered with companies ...

Checking the safety of dividend payments

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Dividends are an important part of total returns from owning a share.   Dividends are a cash payment and therefore the company needs to have...
Sunday, 26 May 2024

When free cash flow may not be what it seems

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Free cash flow comes with a few caveats one need to be aware of. Besides calculating a company's free cash flow, one need to study its...
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Tuesday, 14 May 2024

CHECKLIST ON HOW TO VALUE SHARES

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BIGGEST RISK:  PAYING TOO MUCH The biggest risk you face to be a successful investor in shares is paying too much.    It is important to re...

Can quality be more important than price?

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Paying too much for a share can result in disappointing returns. No company, no matter how good, is a buy at any price. Share valuation is n...

The importance of growth

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If you are going to buy and own expensive shares, you must be very confident that high rates of growth can continue for a long time into the...

Using owner earnings to value shares: Setting a maximum price method

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Setting a maximum price and buying price for Company X shares Current cash profit per share 11.6 sen Divide by interest rate [inflation +3%]...

Using owner earnings to value shares: Earnings Power Value (EPV)

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 EPV gives an estimated value of a share if its current cash profits stay the same forever. Calculation: 1 Normalised or underlying trading...

Using owner earnings to value shares: Cash yield or Interest rate method

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This approach is very simple. Take the owner earnings or the cash profit per share and divide it by the current share price to get a cash in...

Warren Buffett has looked at owner earnings (cash profits) of businesses for many years.

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 In his 1986 letter to shareholders, Warren Buffett described how he worked out what he called the "owner earnings" (referred her...

Manipulation of free cash flow. NOT all FCF should be valued the same.

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Because investors have become suspicious of company profits, free cash flow is a popular way to assess a share.   Rightly, profits are too e...

CAPEX: Look for companies where the capex ratio is consistently below 30%

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Quality companies produce high ROCE (at least 15%) and lots of free cash flow because they don't need to spend much money on new asset...

RETURN ON CAPITAL EMPLOYED

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RETURN ON CAPITAL EMPLOYED Capital employed is just in simple term, the money invested.   Return on capital employed is the company's re...

Interpreting the operating cash conversion ratio

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Turning operating profits into operating cash flow is a desirable characteristic of companies. Does it mean that an operating cash conversio...
Monday, 13 May 2024

Quality of company's profits. Operating cash conversion ratio.

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Operating cash conversion ratio Operating cash conversion = (operating cash flow / normalised EBIT) x 100% (EBIT = operating profit) This ra...

Calculating Net Operating Cash Flow number

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Calculating Net Operating Cash Flow number  CASH FLOW STATEMENT Operating Activities Net Income before Extraordinaries + Depreciation, Deple...
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