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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Harshu Vyas who wrote (74677)	12/29/2023 9:43:55 AM
From: Sean Collett	2 Recommendations Recommended By S. maltophilia Spekulatius Read Replies (1) \| Respond to of 78767

People have been writing on this thread about pro forma manipulation for years. Heck, even Dr. Burry who you mentioned was calling this out here or on his MSN letters back in the late 90's early 2000's. This is nothing new, Harshu. All these things you mention have always been problems and even in 1997 folks were writing about how NCAV were getting harder to find and the environment had changed and so on. I think the issue is the macro environment itself has created a world in which valuation does not matter right now. Folks are investing for future stories and not for a world where money is tighter. Then 2000 happened and all of a sudden value companies took off once again. And who is basing investment theories off of tweets from Dr. Burry? I would hope if one is going to use anything from him they do a further deep dive into his meaning and thus the concepts he's tweeting about. And just looking at the FCF itself without understanding where it comes from is the issue on the investor not the reported figure. Is it from sales of assets? Or is the business generating the FCF through its healthy operations? You have to do some analysis yourself outside of what the figures are just telling you. << The truth is most companies cannot completely pay down their debt through cash flows, anyway>> Well depends on the company and debt/cash level first off. That said the debt level itself isn't so much of a problem as when does the debt come due? If I have $2B of debt termed (and fixed rate) out over 10 years then that's a different game than having $1B due in a few years but then $1B is due in the next month or so. If the debt can be serviced then the leverage isn't as nuclear. In the end everything you have written is what a value investor should be looking at anyway. Taking the numbers and making adjustments where needed and then using the other data points to build your value story. Lynch was some 29% a year, Druck 30%, but somehow you're going to hit 50%? -Sean

To: Harshu Vyas who wrote (74677)	12/29/2023 9:10:00 PM
From: Spekulatius	7 Recommendations Recommended By E_K_S Harshu Vyas Lance Bredvold petal Sean Collett and 2 more members Respond to of 78767

While in the end free cash flows discounted towards the present is all that matters, those free cash flows can be highly distorted by growth, investment, working capital changes as well as by financial transactions (sell- leaseback etc), so to make these adjustment is very difficult and not precise either. Thats why earnings (GAAP or non- GAAP) cannot be ignored typically. There are business where FCF in a strict sense are meaningless (banks, insurance). that’s why you should never look at one metric in isolation as neither earnings more FCF will tell the true picture. I believe the only way to evaluate a business is too look at all those metrics together and if they make sense too you and do adjustments as needed and then come to a conclusion. A current example where FCF does not tell the story are the Malone co like WBD where FCF seems to be great, but share prices are in the doghouse. You got to ask yourself why that is and if you are Mr market gets it wrong. Thats just one example. On revenue growth - almost every great performing stock has good revenue growth/ share. Without revenue growth, it’s almost impossible to have great earnings growth over long periods of time and that’s why revenue growth per share is one of the best predictors for stock performance, not just for tech cos, but generally all stocks.