Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles not included. If any of the articles are behind paywalls it may be possible to read them by searching for the article’s title via Google News.
What Entrepreneurs Really Need To Know About Accounting – Forbes, July 16, 2016 | In the excellent book Shoe Dog, Phil Knight details how he built Nike into a world power. Interestingly enough, one of his keys to success — during the early years — was that he worked full-time as a CPA to pay the bills! But of course, the knowledge he gained from understanding the language of business — that is, accounting — proved invaluable. Let’s face it, running a fast-growing company requires tremendous discipline.
Berkshire’s Post-Election Record High – Rational Walk, November 10, 2016 | In general, investors are best served by ignoring most headlines, tuning out the daily market chatter, and focusing on in-depth fundamental research into the factors that influence the long-term intrinsic value of a business. In this post Rational Walk takes a quick look at the current valuation of Berkshire Hathaway.
Why Warren Buffett does not believe in EBITDA – S&C Messina Capital Management, November 9, 2016 | In the 1986 shareholder letter Buffett delves into what he calls “owner earnings”, which is what he deems to be the correct metric to use for company valuation purposes. When Buffett went into owner earnings it was also a critique against what many deem to be a company’s “cash flow”. Although he does not specifically mention it in the 1986 shareholder letter, he has criticized the term elsewhere – EBITDA, a metric used by many people as a proxy for “cash flow, is an example of “cash flow” that is heavily flawed.
Investing Like Phil Fisher In Real Life – The Conservative Income Investor, November 8, 2016 | Once you figure out the general rules that you are going to use to guide your investment decisions, the next step is the application. How do you connect the timeless philosophical principles that lead to long-term superior investment performance to actual circumstances in real life?
Is Value Investing Broken? – Gannon on Investing, November 9, 2016 | No. Value investing is not dead. There’s a tendency for people – people of any time – to see the time they live in as unique, dangerous, different, unlike any other age. In some ways, they are always right. Some things really are different this time from all other times. But, mostly, they’re wrong. And what they are wrong about is reading a golden age of stability into the past. I was talking with a value investor once and this value investor said that sure Ben Graham’s ideas worked in Ben Graham’s times. But Ben Graham invested in simpler times.
The Intellectual Yet Idiot – Nassim Nicholas Taleb, September 16, 2016 | What we have been seeing worldwide, from India to the UK to the US, is the rebellion against the inner circle of no-skin-in-the-game policymaking “clerks” and journalists-insiders, that class of paternalistic semi-intellectual experts with some Ivy league, Oxford-Cambridge, or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for.
Silicon Valley Style Puts Gloss on Tesla’s Bid for SolarCity – The New York Times DealB%k, November 8, 2016 | If Tesla Motors’ proposed acquisition of SolarCity wasn’t a Silicon Valley deal through and through, it would have been dead on arrival. The deal is about as conflicted as they come. Elon Musk owns large interests in both companies and had the idea for SolarCity, which is led by his cousin. Mr. Musk is also chief executive and chairman of Tesla and is chairman of SolarCity.
Berkshire Hathaway Stock Now Looks ‘Undervalued’ – Barron’s, November 7, 2016 | Gelb called the shares “undervalued” in a client note today, noting that Berkshire stands ready to repurchase its shares at 1.2 times book, which is now roughly $196,000 per class A share. He carries an Overweight rating and a price target of $249,000 per class A share. The class B shares (equivalent to 1/1,500th of a class A share) are up 2.3% today to $146.25, closely tracking the gain in the A shares.
Knowing When to Break Your Own Rules – A Wealth of Common Sense, October 6, 2016 | Everyone from business owners to investors to coaches to parents and beyond has rules, guidelines and policies that they follow. Some are more stringent than others, but laying out your plans in rules-based fashion is one of the most helpful ways to keep your emotions in check. Before deciding whether or not to break your own rules, you have to figure out how to structure those rules in the first place.
Value Investing Using Enterprise Multiples — Is the Premium Due to Risk and/or Mispricing? – Alpha Architect, November 2, 2016 | And we aren’t the only authors who find that enterprise multiples are more effective than traditional value measures such as book-to-market. Other authors have found similar results in the US and International markets. Other market participants are also big fans — e.g., Toby Carlisle and Joel Greenblatt. That all sounds great, but we wanted to know why Enterprise Multiples (EM) performed better than other valuation metrics, historically.
“A reader lives a thousand lives before he dies, said Jojen. The man who never reads lives only one.”
―George R.R. Martin, A Dance with Dragons
Disclosure: #WeeklyInvestorReader contains a few of the articles I read this week and enjoyed the most. I am not receiving any compensation for any of the links provided.