We arrive at a valuation by estimating future cash flows discounted with a cost of opportunity rate of return: for a given level of acceptable risk, what are the sensible rate of returns available in the market? We allow for a margin of error, this is a margin of safety. The margin of safety aims … Read more
We analyse the accounting numbers with a significant emphasis on earnings quality, we look for inconsistencies in the accounting figures, we aim to form an opinion on their reliability. For example some companies go through frequent restructuring, mergers and acquisitions or use several holding companies (with large and numerous minority interests) or apply questionable accounting choices … Read more
Truly great businesses with sustainable competitive advantages are exceptional, and these companies are usually very expensive. Just as we see degrees of uncertainty, we see degrees of competitive strengths. Some businesses may not have any competitive strength at all, and may be valued at book value or less, and other businesses may have some competitive … Read more
Compounders … Read more