““There seems to be some perverse human characteristic that likes to make easy things difficult." —Warren Buffett” The premise of investing is simple: invest in great businesses at a fair price. Naturally, we've taken this simple premise and over complicated it. People have options to invest in individual stocks, index funds, mutual fu...

Want to know the risks of a company? Read the company’s footnotes in their 10Ks. Has the company: • Dipped into reserves for accounts receivable, the so-called bad-debt allowance, or factoring receivables? • Lied about inventory costs to reduce apparent cost of goods sold? • Extended the useful lives of property and equipment to reduce...

Last October was not a good month for Kenvue, the consumer healthcare giant spun out from Johnson and Johnson in 2023. You know the brands—Tylenol, Listerine, Aveeno, Band Aid, Neutrogena, Nicorrete—these are not going anywhere. With bad press—"Tylenol causes autism"—the stock dived to $14 a share. Kenvue is certainly no growth company...

What are frictional costs? They are three things: trading costs, taxes, and inflation. I hardly used to think about them, that is, until I filed taxes on my own. Neither TurboTax nor H&R Block, just me and the IRS forms. What an education! I realized that trading in and out of stocks cost me real money. With each sale, the IRS taxes us...

There are two types of businesses. One exceptional. And one not. It’s easy to spot the difference. But the exceptional are rare. The unexceptional businesses sell commodity-type products or services, which have lots of price competition, low profit margins, low returns on equity, and volatile earnings. Think the auto manufacturers, who...

“Unlike the jewelry or carpet business, where the inventory never depreciates, in retail clothing the entire inventory becomes obsolete with the changing of every season. David Clark, The Tao of Charlie Munger” Most investors think about property, plant, and equipment. But how often do we think about inventory? Probably not enough. But...

Meta reported its free cash flow was $46 billion last year. But this isn't the full story. As Michael Burry and WSJ point out, investors must consider the real costs associated with stock-based compensation. Last year, Meta paid $18 billion for tax withholding expenses related to stock-based compensation. It also spent $24 billion repu...

Many investors believe Warren Buffett was focused primarily on return on equity. But Buffett often referred to return on tangible assets as his preferred indicator of business performance in his writings or even interviews. When interviewed about Kraft Heinz's write downs in 2019, Buffett touted the company's return on tangible assets....

Even in frothy markets, much like today's U.S. stock market, there are always opportunities. But the U.S. stock market is trading at historical highs—just see the Shiller PE or the Buffett Indicator—and it's growing more difficult to ignore the potential impact to equity investors. To understand where we are today, it's useful to look ...

If you don't understand moats, you don't understand Chris Hohn. In an interview with the In Good Company Podcast, Hohn shares his focus: finding industries with strong moats or high barriers to entry. Without moats, companies suffer 1) competition, which kills profits, or 2) substitution, which kills business. Hohn lists industries tha...

Norbert Lou put 16% of his portfolio into Crocs last year. Why did he invest in Crocs? The company's financial statements indicate good economic traits—growing sales, high inventory turns, and high returns on tangible assets. Despite this, I brushed the company aside as a benefactor of the ugly, albeit comfy, shoe trend. But the questi...

“"If I were teaching a course on investments there would be simply one valuation study after another with the students trying to identify the key variables in that particular business and evaluating how predictable they were first." (How to teach business valuation according to Warren Buffett & Charlie Munger)” Sirius XM's subscriber c...

GE doesn't make money selling jet engines or power turbines. Rather, it makes money selling long-term service contracts for jet engines and power turbines. These service contracts are extremely profitable, especially after the first decade. They are, however, extremely complicated to account for, and therefore susceptible to accounting...

Amazon waved a wand and created profits from nothing. Between 2020 and 2024, it reported cumulative pre-tax earnings of $155 billion. But it should have reported $95 billion. Why? A short accounting lesson. Companies buy equipment and build facilities to generate profits. All the money spent to buy or build these assets ends up on a co...