Gross Profitability Ratio – Qualitative Analysis

The Gross Profitability Ratio is gaining credibility in value investing circles because it provides valuable and predictive qualitative analysis when combined with valuation metrics. Some analysts argue it is the single best qualitative metric with which to compare multiple stocks (particularly within the same industry) that have already been determined to be bargains.

...
Read More.

Book of Value Quotes by Anurag Sharma

The quotes from the Book of Value by Anurag Sharma are investment gems that include deep “second-level thinking”.

Careful and rigorous analysis helps investors resist the temptation to do foolish things. Good investors are capitalists — they invest on the basis of sound data and analysis, with an eye for what could go wrong.

...
Read More.

Dividend Coverage Ratios: How Safe is Your Dividend?

Dividend Coverage Ratios allow analysts to evaluate the safety of a company’s dividend. Many investors concentrate on the dividend yield but don’t give sufficient attention to the safety of that dividend.

In the long run companies must create enough cash flow to pay expenses, invest in the future (capital expenditures), service their debt (if any), and return money to shareholders.

...
Read More.

Dividend Yield: Definition, Calculation, & Relationship

Dividend yield is the annual dividend per share of a company compared to the price of the stock expressed as percentage. In other words it tells you the percentage dividend return the stock owner receives on the current price of a stock.

The dividend yield has historically provided approximately one-half of long term total stock market returns to investors. It’s a little less than one-half for those who take their dividend and little over one-half for those who reinvest their dividends.

...
Read More.

Dividend Payout Ratio vs. Cash Dividend Payout Ratio

Dividend Payout Ratios provide us valuable information on how much money a company is returning to shareholders and their ability to pay and increase the dividend. One of these ratios is far superior to the other.

The Dividend Payout Ratio and the Cash Dividend Payout Ratio are compared to find out which is better at providing pertinent information to differentiate between various dividend paying companies.

...
Read More.

Net Financial Debt and Ratios: Analyzing Leverage & Risk

Net Financial Debt and its ratios are an effective and efficient metric when analyzing companies. These metrics are more important than ever because of the corporate trend to leave cash overseas and borrow domestically.

The balance sheet is the foundation from which a company operates its business. A company’s liquidity and the leverage used play a big role in the success or failure of a business. Net Financial Debt is a critical metric for investment analysis.

...
Read More.

Intrinsic Value and Its Relationship to Margin of Safety

The purpose of estimating intrinsic value is to take advantage of mis-priced assets. Don’t get discouraged because you feel it’s difficult to determine the intrinsic value of a stock. It is not a science! It is the variables that make up your estimated intrinsic value that are more important than an exact intrinsic value number.

...
Read More.

Portfolio Diversification Definition and Purpose

Portfolio Diversification is a foundational concept in investing. It can be a rather basic and easy to understand concept. However, in its implementation, many investors make catastrophic mistakes with too much concentration and others settle for average performance because of over diversification.
Portfolio diversification is a balance between concentration and over diversification to optimize risk and potential return.

...
Read More.

Altman Z-Score Formula – Screening For Bankruptcy Risk

As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.

...
Read More.

The Most Important Thing by Howard Marks: Book Review and Summary

Howard Marks delivers his commentary in a style that has been described as “insightful, direct, homespun, expert and sharply pointed”. His objective in writing The Most Important Thing was to provide a book that would lay out his investment philosophy in a manner that would be beneficial to the average investor.

His approach is to lay out The Most Important Thing Is….. in 20 Chapters. Each is a building block to successful investing. Together they create a “solid wall” in which each piece is essential “guideposts” that keep investors focused on the most important things for successful portfolio management.

...
Read More.

Quantitative vs. Qualitative Approach to Value Investing?

There is a debate between two approaches among investors: qualitative vs. quantitative. In reality, every investor adopts at least a little of both approaches; but may emphasize one or the other. The qualitative approach concentrates on the quality of the company. Emphasis is put on the company’s products, services, management, competitors, etc. A quantitative approach concentrates on the income statements, balance sheets, and cash flows, and analyzes the relationship between price and intrinsic value .

...
Read More.