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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Stock Farmer who wrote (47773)10/11/2001 3:45:37 AM
From: Seeker of Truth  Read Replies (2) of 54805
 
One item, John. Both you and Pirah have said that we should subtract all investment in production facilities or in acquiring other companies from the cash flow. I'm bewildered. True, for some companies the investment in production facilities is a yoke around their neck, something they must continually do without increasing the profits. This is typical of a heavy industry company. But for other companies investments can really pay off. When Microsoft bought their operating system from a little company should that expenditure have been subtracted from profits? One does get the feeling that reserve cash is important and over the long term it should increase. But surely there are periods when some very wise investments are being made and the reserve cash is being somewhat depleted rather than being added to. Do we say that the company's cash flow is decreasing in such periods?
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