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Strategies & Market Trends : Value Investing
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To: Graham Osborn who wrote (55677)7/13/2015 5:01:14 PM
From: IndependentValue  Read Replies (1) of 78673
 
Hi Graham

Thanks for your response - a couple of thoughts/questions:

Agree on the inflection point - I tend to look at last 3-5 years for stocks that pass my initial EV/FCF screen (less than 7x) - I will then extend to c. 10 years FCF record to ensure reasonable consistency in the track record - this generally indicates persistence of quality and/or competitive advantage in my view. This approach also mitigates the variability of FCF that you highlight

You mention that you dislike both income-dependent multiples and book dependent ones - so what type of multiples does that leave you with? (I assume income dependent includes P/S, P/E, P/FCF, EV/EBITDA etc as these are all types of income just at different levels descending the income or cash-flow statement) ?

Also, can you explain further how ROIC is harder to use in a mature bull market? Not sure I follow you on this point. Also is ROE not income dependent ?

Finally, agree on screening generally; I've stayed away from screening for quite a while, but returned to it just in the last few weeks, given lack of identifiable opportunities/value out there in my view based on news flow (seems like anything interesting from reading news flow is at a 20 PE / 15x EBITDA / 25x+ FCF !)
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