Thanks Don for such an detailed post!
First there is NO substitute for reading the filings
I couldn't agree more with that statement and that paragraph.
If a company is really generating that kind of net earnings, debt should be almost nonexistent.
Actually, that's exactly right....most of these companies have very little to no debt....I just used the .5 debt ratio to screen out the worst of the offenders....sometimes heavy debt can be justified in the capital intensive enterprises....CCL comes to mind, it takes 400+ million to build a new ship, so they borrow the money and pay it off when the ship is operational.
You make an interesting point about long-term structured debt like preferred and convertibles....I'll have to mull over that for a while....I mean I see your objection to the dilution of common shareholder rights that happens here, but the leveraging of assets isn't always bad for the shareholder.....
Cash flow not including borrowings or sales of securities is probably your best indicator on how profitable a company is.
Again, you're absolutely right....in fact, I think you've given me the next step in the process....determine Free cash flow....Thank you!
I never thought to look at the Def14A as a management evaluation tool, I'll check that out.
I, too, don't think much of P/E, BV, or PEG as evaluative tools. I mean if I see a company has a P/E of 800, chances are I won't spend too much time looking further, but otherwise, these are too "slippery" for me to have any security.
Probably the hardest thing to judge is if a particular company or sector has potential "sex appeal" to investors.
Well, I guess that depends on my investing objective and time frame. This batch is for a potentially long term holding. Over the long term, quality net nets will provide decent returns if purchased at a good price. Some of them will develop that "sex appeal" maybe, and provide outsized returns.
Yes, discipline is the key to maximizing returns and exercising good money management practices. I am learning, I am learning.
Timba |
