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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Stu R who wrote (35657)11/29/2000 2:23:47 PM
From: Mike Buckley   of 54805
 
Stu and Pirah,

The discussion you're having about the importance of free cash flow is somewhat related to Moore's contention that all gorilla candidates in the tornado are profitable. I agree with Pirah that free cash flow is a more accurate measurement of profitability than net income. When the manual states that a company's market capitalization is in effect the net present value of the company's future returns, I also believe free cash flow is a better measurement of those returns than earnings. That's because the ultimate return includes either the liquidation value or the sale value of the company, which of course is measured in cash. Earnings aren't cash. Free cash flow is.

--Mike Buckley
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