Unlock the mysteries of the stock market with us! We break down complex topics into simple, easy-to-understand language. Join over 21,000+ readers who receive our insights every Tuesday.
๐ฐDepreciation vs Amortization Explained Simply
|
Hey Reader, In today's issue:
๐ธSponsored by: Is your finance software falling short? Imagine having cutting-edge financial tools that simplify spending and eliminate busywork. Check out Ramp! โ Ramp is the corporate card and spend management software designed to help you save time AND put money back in your pocket. With Ramp, finance teams gain unprecedented control and insight into company spending. Issue cards to every employee with customizable limits and restrictions, and automate expense reporting to stop wasting time at month-end. Say goodbye to chasing down receipts and lengthy expense reports. The time saved each month allows you to close your books 8x faster. With Ramp, set it and forget itโapply filters and focus on other tasks. Ramp saves you money. Businesses using Ramp save an average of 5% in the first year. Itโs easy to useโget started, issue virtual and physical cards, and make payments in less than 15 minutes, whether you have 5 employees or 5,000. And now get two hundred fifty dollars when you join Ramp. Just go to ramp.com/BEGINNERS.โ Cards issued by Sutton Bank, Member FDIC. Terms and conditions apply. ๐NUGGETS โ My Favorite Findsโ Brian Feroldi breaks down the difference between depreciation and amortization as only he can, simply and concisely. Howard Marks thoughts on asset allocation. If Warren Buffett reads it first thing in the morning who am I to disagree? Big opportunity in the AI space around electricty generation and nuclear (I know, I know). Eric explains in depth, well worth the time. Michael Mauboussin dives into company lifecycles and explains (better than I ever could) how they impact returns. โBreaking down a basic understanding of a company's financial statements. โ50 wide moat companies, which one reigns supreme? I know but you are going to have to read to find out. ๐DEEP DIVEโ Reading annual reports is a necessary part of analyis. But how do we do it? Professor Aswath Damodaran is the dean of valuation. He has developed a six-part framework for reading through the annual report to find the necessary inputs to value any company. From these, we need to discover:
๐๐ผ๐ป๐ณ๐ถ๐ฟ๐บ ๐๐ต๐ฒ ๐๐ถ๐บ๐ถ๐ป๐ด ๐ฎ๐ป๐ฑ ๐ฐ๐๐ฟ๐ฟ๐ฒ๐ป๐ฐ๐ - Which time frame is included? - In what currency are the figures presented? ๐ ๐ฎ๐ฝ ๐๐ต๐ฒ ๐ฏ๐๐๐ถ๐ป๐ฒ๐๐ ๐บ๐ถ๐ - What segments does the company operate in? - How is the geographic distribution structured? ๐๐ถ๐ป๐ฑ ๐๐ต๐ฒ ๐ฏ๐ฎ๐๐ฒ ๐ถ๐ป๐ฝ๐๐๐ ๐ณ๐ผ๐ฟ ๐๐ฎ๐น๐๐ฎ๐๐ถ๐ผ๐ป ๐๐ณ๐ฐ๐ฎ ๐ต๐ฉ๐ฆ ๐๐ข๐ญ๐ข๐ฏ๐ค๐ฆ ๐๐ฉ๐ฆ๐ฆ๐ต - What is the companyโs debt level? - Are current assets greater than current liabilities? - Is there significant goodwill recorded? ๐๐ณ๐ฐ๐ฎ ๐ต๐ฉ๐ฆ ๐๐ฏ๐ค๐ฐ๐ฎ๐ฆ ๐๐ต๐ข๐ต๐ฆ๐ฎ๐ฆ๐ฏ๐ต - Is there a consistent rise in revenues? - Does selling products require high COGS? - What portion of revenue becomes net income? ๐๐ณ๐ฐ๐ฎ ๐ต๐ฉ๐ฆ ๐๐ข๐ด๐ฉ ๐๐ญ๐ฐ๐ธ ๐๐ต๐ข๐ต๐ฆ๐ฎ๐ฆ๐ฏ๐ต - Are earnings largely converted to operating cash flow? - Is there a positive free cash flow (operating cash flow minus CAPEX)? - Has the cash position improved since last year? ๐๐ฒ๐ฒ๐ฝ ๐ฑ๐ถ๐ด๐ด๐ถ๐ป๐ด ๐ถ๐ป ๐๐ต๐ฒ ๐ณ๐ผ๐ผ๐๐ป๐ผ๐๐ฒ๐ ๐น๐ผ๐ผ๐ธ ๐ณ๐ผ๐ฟ - Is there extensive use of SBCs? - What is the debt maturity schedule? ๐๐ผ๐ป๐ณ๐ถ๐ฟ๐บ ๐ง๐ต๐ฒ ๐จ๐ป๐ถ๐๐ - What is the total number of shares outstanding? - Are there any preferred shares? - Are acquisitions financed with stock? ๐๐ผ๐ฟ๐ฝ๐ผ๐ฟ๐ฎ๐๐ฒ ๐๐ผ๐๐ฒ๐ฟ๐ป๐ฎ๐ป๐ฐ๐ฒ - Are there special privileges for insiders? - Does management have significant ownership? Good luck and may the force be with you. ๐Knowledge Tidbitsโ
Thanks, โ When you're ready, here's how we can help you: โValue Spotlight: Stock market investors can save time and find success by discovering the right tools and resources. If you don't know where to start, or are simply tired of wading through the endless sea of financial information, Value Spotlight was created for you. How did we do today? ๐ Loved it!โ ๐๐ผ It was okayโ โ ๏ธ Not greatโ |
Hi! Welcome to Investing for Beginners
Unlock the mysteries of the stock market with us! We break down complex topics into simple, easy-to-understand language. Join over 21,000+ readers who receive our insights every Tuesday.
Hey Reader,Did you know that the S&P 500's lowest recorded P/E ratio was 5.31 in 1917, while its highest was 123.73 in May 2009, during the financial crisis? This represents a range of over 2,200% between the most undervalued and overvalued market conditions, demonstrating how dramatically valuation perspectives have shifted across different economic eras. In today's issue: Warren Buffett breaks down how he would invest if he could start over. What is never sell really? Why ROIIC is more...
Hey Reader,Did you know Professor Damodaran constantly emphasizes that there is no single "correct" value for a company? Valuation is filled with uncertainty and bias. The goal isn't to be perfectly right, but to be "less wrong" over time. He views valuation as a craft that improves with practice, humility, and a willingness to acknowledge what you don't know. In today's issue: Aswath Damodaran covers the dark side of valuation Checklist to help evaluate management and capital allocation...
Hey Reader, Warren Buffett transformed investing by emphasizing โmoatsโโthe lasting competitive advantages that protect great businesses. As he wrote, โThe key to investing is determining the competitive advantage of any given company and, above all, the durability of that advantage.โ In today's issue: How Pat Dorsey builds wealth by investing in wide moat businesses. Terry Smith on the art of compounding and investing. Morgan Housel shares some very "bad advice." Much more.... ๐ธSponsored by:...