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Book of Value - The Fine Art of Investing Wisely 2016(Anurag Sharma)
https://bbs.pinggu.org/forum.php?mod=viewthread&tid=6303889&from^^uid=109341(Page 190-204)
阅读到的有价值的内容段落摘录
Define good business
From the viewpoint of investors, perhaps the simplest way to define a good business is one that, on average and over time, consumes a dollar to produce a stream of cash that, when appropriately discounted, amounts to something more than a dollar. In evaluating how much to pay for such streams of cash, investors remain fundamentally interested in the ability of a business to make more from less. Measuring the performance and potential of a business is a complex endeavour; the metrics used to do so depend on who is measuring what. For instance, if we define performance as the degree to which a company dominates the markets it serves, then we must clearly define those markets; yet, as constructs, markets defy objective definition. If we think of performance as corporate social responsibility, then we must be clear about what social responsibility means and which specific measures best proxy that aspect of performance. If we focus on financial performance, then we must decide which specific measures we ought to use and why. Do we measure returns to shareholders, returns on the capital deployed, or cash flows? Market returns or accounting measures? It is important for investors to understand the political dynamics inside the company and make judgments regarding the degree to which the metrics used to measure performance support their interests.
Capital Efficiency
A handful of simple ratios and the key factors that drive them can give
a quick sense of how efficiently a company deploys capital. These are
1. Return on equity (ROE)
2. Return on assets (ROA)
3. Return on capital (ROC)
Cash Economics
Financial statements are difficult to understand because they are prepared under the guidance of complex rules encoded in the Generally Accepted Accounting Principles; such rules give managers and accountants wide discretion in how they report financial information. Sometimes the accounting is so complex, in fact, that it can be difficult for an average investor to ascertain the true economics of a company. This is especially true with regard to the income statement
and balance sheet because these follow the complex rules of accrual accounting. The measures of capital efficiency that we have used so far are constructed using variables from the income statement and the balance sheet, and, therefore, they are subject to quite a bit of managerial discretion and possible distortion. One way to overcome this problem is to penetrate the statement of cash flows, which uses cash accounting and is sometimes (although 198 Define Good Business not always) a better representation of a company’s true economics. Moreover, understanding how cash flows in and out of a business provides important insights into its enduring power to produce cash. Hence, in order to be able to disconfirm an investment thesis on the criteria of good economics, we must also examine how the company gets the cash to finance its operations, how much cash those operations generate, and what the company chooses to do with the cash so generated.
阅读到的有价值信息的自我思考点评感想
To review the performance and valuation of a business is in no way an easy task. You have to understand the business, not only the present but also the future internal (Company) and external (competitors) and thus the business economics, the capital efficiency, cash economics from the financial statements and related published news from all sources that is assessable. It is not only the earnings but returns on capital/assets utilization efficiency in particularly the cash flows is also important points to review.
Typically, it’s best to do analysis with three- or five-year averages to avoid basing decisions on performance over just one year. Multiyear averages are more likely to reveal the true underlying economics and avoid aberrations based on short-term fluctuations in circumstances. For a skeptical investor trying to refute the investment thesis, these signs of slowing growth and hesitation in committing cash to operations and shareholders are worth noting. Even so, based on this analysis and the preceding analysis of capital efficiency, we are unable to refute the subthesis that Walmart has good economics. Our original investment thesis stands as is, therefore— although, going forward, we must incorporate into our thinking signs of slowdown and the development of new business economics that is the web purchases has substantially substitute the actual shops purchases.
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