A Quote by Walter Schloss
One has to know more about a company if one buys earnings.
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They get, you know, whatever they want from their earnings, and their earnings go into their own company.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
He that buys land buys many stones,
He that buys flesh buys many bones,
He that buys eggs buys many shells,
But he that buys good ale buys nothing else.
The human animal is a beast that eventually has to die. If he's got money, he buys and he buys and he buys. The reason he buys everything he can is because of some crazy hope that one of the things he buys will be life everlasting.
I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.
If you can follow only one bit of data, follow the earnings - assuming the company in question has earnings. I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.
This is the standard procedure for corporate growth these days; one company buys up another on loans that are floated on the basis of future earnings, and the monopoly or oligopoly created in this way produces the necessary funds by squeezing out competition, and passing the costs along to the consumer. The bucket that holds the new wealth is called a corporation.
Being captive to quarterly earnings isn't consistent with long-term value creation. This pressure and the short term focus of equity markets make it difficult for a public company to invest for long-term success, and tend to force company leaders to sacrifice long-term results to protect current earnings.
A typical guy who buys organic food doesn't really buy it in order to be healthy; he buys it to regain a kind of solidarity as the one who really cares about nature. He buys a certain ideological stance.
A young financial writer once brought ridicule upon himself by stating that a certain company had nothing to commend it except excellent earnings. Well, there are companies whose earnings are excellent but whose stocks I would never recommend. In selecting investments, I attach prime importance to the men behind them. I'd rather buy brains and character than earnings. Earnings can be good one year and poor the next. But if you put your money into securities run by men combining conspicuous brains and unimpeachable character, the likelihood is that the financial results will prove satisfactory.
There is no contest between the company that buys the grudging compliance of its work force and the company that enjoys the enterprising participation of its employees
That's one thing that's always, like, been a difference between, like, the performing arts, and being a painter, you know. A painter does a painting, and he paints it, and that's it, you know. He has the joy of creating it, it hangs on a wall, and somebody buys it, and maybe somebody buys it again, or maybe nobody buys it and it sits up in a loft somewhere until he dies. But he never, you know, nobody ever, nobody ever said to Van Gogh, 'Paint a Starry Night again, man!' You know? He painted it and that was it.
When people talk about cash being king, it's not king if it just sits there and never does anything. There are times when cash buys more than other times, and this is one of the other times when it buys a fair amount more, so we use it.
Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.
I met with several public company CEOs to learn about their experiences of going public and listened to as many earnings calls as I possibly could.
The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of "normal" earnings power over time.
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