Understanding Where Investment Returns Come From: Yield, Growth, and Multiple Expansion
Achieving financial success in the stock market demands a profound grasp of the three sources of investment returns: Yield, Growth, and Multiple expansion. But how many of us understand those sources? Think of investment returns like a stew with yield, growth, and multiple expansions as the ingredients creating investment success. In today’s post, we will […]
Unlocking Financial Insights: How the 3 Key Financial Statements Interconnect
“Accounting is the language of business.” Warren Buffett This brief quote underscores Buffett’s belief that a deep understanding of financials and accounting remains essential for investors and business leaders. By “speaking” and “understanding” this language, individuals can make informed financial decisions, evaluate investment opportunities, and assess the financial health of companies. In today’s post, we […]
John Rotonti Shares a Masterclass on Research and Valuation
Welcome to the Investing For Beginners Podcast! In this episode, we have a special guest, John Rotonti, who shares valuable insights on the importance of Return on Invested Capital (ROIC) in determining the intrinsic value and growth potential of a company. John explains that if the ROIC is higher than the cost of capital, it […]
ROIC vs ROCE: When to Use One Over the Other [Pros & Cons]
Updated 8/25/2023 ROIC (Return on Invested Capital) and ROCE (Return on Capital Employed) are formulas describing how efficiently a company invests its capital. The difference between ROIC vs ROCE is subtle but powerful—basically, one (ROCE) is a shortcut of the other (ROIC). Before diving deeper, here’s the simple cliff notes: Return on Capital Employed Formula […]
The 7 Types of Capital Allocation and What They Mean for Shareholders
Updated 9/3/2023 “Capital allocation is a senior management team’s most fundamental responsibility. The problem is that many CEOs don’t know how to allocate capital effectively. The objective of capital allocation is to build long-term value per share.” Michael Mauboussin As we will see, job number one for CEOs remains capital allocation because those decisions drive […]
Warren Buffett Buys American Express
Updated 9/3/2023 American Express was one of the turning point investments for Warren Buffett. It began his path to becoming the investor he is now. Buffett’s buying of American Express was the first of “buying wonderful companies at fair prices.” Today, American Express is one of his largest positions; fifty-seven years later, he owns over […]
Investment Terms Everyone Should Know
Updated 9/3/2023 If you are new to investing, all the terms and jargon might seem overwhelming. But today’s post will help you learn some of the more common terms used in investing. Remember, learning to invest is like eating a pizza; you have to eat it piece by piece, and eventually, you will have it […]
Analyzing Intangible Assets and Their Impact To Assets and Operating Income
The change in how companies invest their capital has grown exponentially, and accounting rules have not kept up. Intangible assets comprise a larger portion of a company’s equity and assets than twenty years ago. While at the same the amount of physical assets on companies’ balance sheets has dropped. That shift has occurred during the […]
Convertible Preference Shares – Great Alternative to Buying Bonds
Updated 8/7/2023 Preferred shares are the red-headed stepchild of the investment world; they are relatively unknown among most investors. But investors such as Warren Buffett use them to invest in companies such as Occidental, as recently as May 2019. Preferred shares come in many different flavors, and today’s article will uncover the magic of convertible […]
Financial Accounting for Beginners: Debits/Credits, P&L, Assets/Liabilities
Updated 8/7/2023 Recently, Berkshire Hathaway earned $81.4 billion in 2019, a 1,900% increase from the year before! How was this possible, by an accounting rule instituted in 2018 that requires companies to include in their bottom line gains from their stock portfolio, even if they don’t sell the stock. Buffett vehemently disagrees with this accounting […]
