Money and Finance
Cates: When we do a longhand net present value calculation to discount back the free cash flows, we usually use eight years worth of cash flows at a particular assumed growth rate. Then [at the end of] year 8, we put the terminal multiple (almost always one that assumes no growth from that point forward) on the cash flows at that point. That is what values the remaining cash flows from the business beyond year 8. The main thing there is being very conservative since no one can really have a clue what will happen then.
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From The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns: Factor screening on any of the aforementioned ratios suffers from a major flaw: Company value is determined by all future free cash flows discounted...
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How does one establish the value of a long-lived asset? Hopefully, that question stirs the economist in all of you, and you immediately respond that every security is a claim on some long-term stream of cash payments (including any terminal value) that...
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Thanks to Matt for passing this along. Nothing tests the mettle of a value investor like watching a large portfolio holding slowly and steadily meltdown. Yet that’s exactly what happened last spring to Mason Hawkins and his partner, Staley Cates, the...
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Money and Finance
Cash Flow Analysis: A Private Lesson from Staley Cates
Cates: When we do a longhand net present value calculation to discount back the free cash flows, we usually use eight years worth of cash flows at a particular assumed growth rate. Then [at the end of] year 8, we put the terminal multiple (almost always one that assumes no growth from that point forward) on the cash flows at that point. That is what values the remaining cash flows from the business beyond year 8. The main thing there is being very conservative since no one can really have a clue what will happen then.
- Quality And Value...
From The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns: Factor screening on any of the aforementioned ratios suffers from a major flaw: Company value is determined by all future free cash flows discounted...
- Hussman Weekly Market Comment: An Open Letter To The Fomc: Recognizing The Valuation Bubble In Equities
How does one establish the value of a long-lived asset? Hopefully, that question stirs the economist in all of you, and you immediately respond that every security is a claim on some long-term stream of cash payments (including any terminal value) that...
- Two Celebrated Investors Want To Fix Their Funds--and Chesapeake Energy
Thanks to Matt for passing this along. Nothing tests the mettle of a value investor like watching a large portfolio holding slowly and steadily meltdown. Yet that’s exactly what happened last spring to Mason Hawkins and his partner, Staley Cates, the...
- Portfolio Returns - Part I
I figured that we should take a look at portfolio returns so we can see exactly where we stand. If you don't know what you're actually returning then it's hard to tell if it's a good investment. While some people are focused on just...
- Dividend Compass - Royal Dutch Shell
Todd Wenning's Dividend Compass is a diagnostic tool that covers the parts of fundamental analysis most useful to dividend investors. This is a pretty broad set of metrics, Todd describes them here: "Sales growth: Sales are the life-blood of a company....