Category: Main course
-
18. Intrinsic Value – Discounted Cash Flow
Why a lemon drink and a paradisiac beach? Because at the end of this journey, we will meet together on an exotic beach as digital nomads, enjoying the dividends of our companies. Am I joking? Every great adventure contains a treasure to discover, risks, and a good dose of uncertainty. I cannot tell you the…
-
17. Cash Flow Statement Analysis
This is the last chapter of the analysis of the financial statements. In my opinion, the Cash Flow statement is the most important because it describes the amount of cash and cash equivalents entering the company. What we are going to learn: As we saw in the first article, the income statement uses the accrual…
-
16. Balance Sheet Analysis
In the first part of our overview, we analyzed the income statement, now we are going to look at the capital structure of our business, namely: the balance sheet. If earnings are our engine, the balance sheet is the frame of our machine. I like using allegory to make the point, in this case a…
-
15. Income statement analysis
Here we go! The first thing to do is recovering the financial statements of the company that we have chosen. A good idea is to choose a company within our circle of competence (10. Circle of competence). What we are going to learn: The goal is to find the best compounder with a competitive advantage.…
-
14. It’s a war
“In business, I look for economic castles protected by unbreachable moats” Warren Buffett Capitalism is like life, it is a war. Our goal is to find the best fortress where to put our capital, ideally a fortress with a wide moat, and a smart and powerful lord.In the course of human history, battlegrounds have changed…
-
13. 10-K
“The SEC enforces the securities laws to protect the more than 66 million American households that have turned to the securities markets to invest in their futures—whether it’s starting a family, sending kids to college, saving for retirement, or attaining other financial goals.” sec.gov As explained on the first page of the SEC website, the…
-
12. Starting point
Well, let’s start our journey through the numbers. As I said, quantitative analysis isn’t my preferred part. I prefer good stories, but over time, due to some errors, I understood the importance of numbers. Stories sometimes lie (i.e because the CEOs lie, often they are only good salesmen. We will learn how to value a good…
-
11. Stories and numbers
“Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.” Peter Lynch Peter Lynch is one of the best investors of all time, he ran the Magellan fund, which earned an annual return of 29.2% from 1977 until 1990. In other words, if…
-
10. Circle of competence
“The game of investing is a process of discovering who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people.” Li Lu – Himalaya Capital Fund. One of the most essential things in investing is to…
-
9.1 Appendix – Economic Cycles
In article 9 I wrote about “Economic Cycles” but I need to clarify some points. Life, economy, business. The economy follows a cyclical pattern, the same is true for human life and business life but we will dig deeper into business life when we will talk about valuation. Economic cycles are mainly defined by the…