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

To: E_K_S who wrote (74807)	1/8/2024 8:07:07 AM
From: Harshu Vyas	1 Recommendation Recommended By E_K_S Read Replies (2) \| Respond to of 79000

Not clever enough to figure out PYPL. It's incredibly "popular" in that many investors like it. But is 17x earnings and 24x (unadjusted) FCF cheap enough? Possibly. I just don't know nor do I fully understand these financial services businesses. I don't even use PYPL so who am I to comment? As for new CEOs, I tend to agree. I like new CEOs and investing when everyone has written off the company. VFC is one I've been looking at for a while (and the WSJ has written a couple of recent articles about Brakcen Darrell). I just can't get over the fact they bought Supreme in the past. Must divest it and delever, before I can take the deal seriously. For now, I prefer WWW since management have already proven that they will cut the crap. GPS interested me a lot in the summer, too. ROIC/ROA depends on the business: ROIC is a terrible measure in capital light businesses and is heavily overused (especially since that Mckinsey Valuation book). ROA is incredibly underrated probably because of its sheer simplicity, imo. I must admit I'm not a fan of using "Net Income" - I prefer average net income (5y) or average free cash flow. Some investors like to deduct intangible assets when they calculate "returns" - that doesn't make sense since that cost has been incurred for future profitability. Others like to totally deduct it from book value - that did make sense at a point in time but now almost all businesses are intangible in nature. You'd be left with almost nothing by using this approach. If you're lucky you may be able to snag a "hard asset" commodity business in the steel or oil industry. I think this was Walter Schloss's strategy and it worked for him. The measure Spekulatius was describing in an earlier post was similar to ROCE where ROCE = EBIT/Total Assets less current liab. This can also be useful in the right context. ROE is great provided the company doesn't have too much debt (as Sean pointed out) and isn't cyclical. So, average ROE becomes the better measure. And then there's the more "complex sounding" stuff like RONIC and ROACE blah, blah, blah... it's just not really useful. Most people are probably unintentionally using this stuff using their brains without quoting its formal acronym. All in all, these fancy financial acronyms can be useful but, honestly, I don't think they should put you off/on a business. Your clarity of thought and sheer logic are the most important facets to investing. That's what I think anyway. Sometimes people put to much emphasis on these tools that don't actually need to be constantly applied. After all, it makes it look like you're doing the "hard work" and can analyse a business well. It also makes you sound clever. In reality, the analyst with the most basic financial jargon knowledge and best understanding of business will always trump the person that spews out a financial dictionary at any given time. What was that story about a farmer that constantly bought whenever the market fell? Best, Harshu Vyas