Hey Reader,
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Did you know? Buffett chooses from three breakfast items based on how much his wife puts in a cup for him. The options are two sausage patties, a sausage, egg, and cheese, or a bacon, egg, and cheese. He usually drinks a Coke with his breakfast. Buffett's choice depends on the market, with bacon when the market is up and sausage when it's down

In today's issue:

• Breakdown EBITDA, Net Income, and Free Cash Flow
• Discover the power of Scale Economies Shared by Nick Sleep
• How to analyze companies in only one hour a day
• Everything you need to know about Return on Equity (it's surprisingly easy to learn.)
• Much more...

💸Sponsored by:

Want to learn to become a better investor?

Then, you NEED to understand accounting.

Warren Buffett has said accounting is the language of business, and investors must understand this language to be successful investors.

Brian Feroldi and the gang from Long-Term Mindset are the best teachers of these concepts. They can make complicated subjects/concepts easy to understand.

By using clear, concise language and best-of-breed visuals, you are assured of understanding these terms and concepts.

The Accounting Explained Visually ebook normally costs $49, but it is available at a 50% discount for our readers.

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💎NUGGETS

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My Favorite Finds

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Ever wonder what the differences are between EBITDA, net Income, and Free Cash Flow? Well, thanks to Brian Feroldi, you know now.

Want to become a better investor? You MUST read Nick Sleep's Nomad Partnership Letters. You will learn about Scale Economies Shared, Destination Analysis, and more (also only 218 pages).

An oldie, but goodie, the Brooklyn Investor tackles the question, Why BRK? Still relevant today.

Many of us have limited time to research companies and figure out what to buy, Geoff Gannon tells us how to do it in only one hour a day.

Thomas Chua breaks down the truth behind the price we need to pay to be succesful. Must read article.

John Huber breaks down Peter Lynch's investment style and dispels a few myths. (John is a gem of a writer).

🔍DEEP DIVE

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Return on Equity

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Deep Dive

Everything you need to know about Return on Equity:

Ever wonder how to tell if a company is good at making money?

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That’s where Return on Equity (ROE) comes in.

ROE is like a report card for how well a company uses the money its owners invest. Here’s how you calculate it:

𝗥𝗢𝗘 = 𝗡𝗲𝘁 𝗜𝗻𝗰𝗼𝗺𝗲 ÷ 𝗦𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿𝘀’ 𝗘𝗾𝘂𝗶𝘁𝘆

Warren Buffett, one of the world’s best investors, loves ROE.

He looks for companies with a high ROE that stays steady over time.

Buffett loves a ratio > 15%.

But ROE isn’t perfect on its own. That’s why smart investors use something called DuPont analysis.

It’s like breaking down a big math problem into smaller parts.

DuPont analysis looks at three things:

1. How good the company is at making profit
2. How well it uses its assets
3. How much it relies on borrowed money

For example, a company might have a high ROE because it borrows a lot of money, not because it’s super profitable.

DuPont analysis helps you see that.

Pros of ROE:

• It’s easy to calculate and understand

• It helps compare companies in the same industry

Cons of ROE:

• It doesn’t work well for comparing companies in different industries

• A high ROE might hide problems, like too much debt

Remember, ROE is just one tool in your investing toolbox. Use it wisely, and always look at the bigger picture.

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📖Knowledge Tidbits

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Value Spotlight (Andrew Sather) @ValueSpotlight Calculating ROIC Contest (Tutorial): $GOOGL in <90 seconds 10:5 AM • Sep 23, 2024 39 Retweets 242 Likes Read 4 replies

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Thanks,
Dave Ahern
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​einvestingforbeginners.com​
​Investing for Beginners Podcast​

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When you're ready, here's how we can help you:

​Value 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.

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