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1/ "General Electric shares are up 44% ....part of a shockingly high proportion of listed companies that have been losing money." wsj.com/articles/money…

"Expected long-term cash flows, discounted by the cost of capital—not reported earnings—determine stock prices."
2/ Saying a business "loses money" avoids the need to do actual work that may create an analytical edge.

The real work is unavoidable unless you are a speculator (ie, not an investor). "GE once saw break-even cash flow as best-case scenario for 2019." google.com/amp/s/www.bizj…
3/ I am not expressing a opinion on the current GE valuation.

I am saying making a decision about valuation based only on whether the business is "losing money" is like trying to solve a murder mystery with only one clue (that may be false). If you want an investing edge: work!
4/ 25iQuiz: Assume you bought a 30-year US Treasury Bond paying a 3.00% coupon in September 2018. "That means the bond will pay $30.00 per year for every $1,000 in face value that you own." bankrate.com/investing/how-…

Did you "lose money" in the first quarter you owned that bond?
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Tren Griffin
@trengriffin
I decided to read sell-side analyst reports at 3AM to distract me from kidney stone pain that woke me up last night. These reports can be helpful in summarizing what has already happened. Adopting some of the recommendations in the reports would cause more pain than my stone.
Forecasts (AKA guesses) in analyst reports can be a good source of humor though. For example,

"Sixteen of the world’s 500 billionaires have space investments, which could grow from a US$360bn market today, to potentially as big as US$2.7tn by 2045E (source: ULA)."
"While only 560+ people have ever been to space vs. a 7bn+ global population, government spending on space is expected to reach $79bn by 2025 vs $62bn in 2016 and the space market involving nanosatellites, space tourism etc could reach nearly $1tn by 2030 (source: OECD, ULA)."
Read 4 tweets
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Tren Griffin
@trengriffin
"We do get approached when somebody has a takeover bid. They say, 'Would you like to top it or something?' To which our answer, invariably, is no." Buffett

"Well, we're very good at saying no." Munger

"Charlie's even better than I am." Buffett
"By no means have we given up on putting our cash to work. If we don’t, the money isn't going away."

"At some price, we’d buy back Berkshire. We’re not looking for the chance to gleefully buy out shareholders at a substantial discount to value." (2005) d2wsh2n0xua73e.cloudfront.net/wp-content/upl…
Munger: "Our problem in finding investments is people are willing to pay higher prices than we are."

Buffett: "You can turn any investment into a bad deal by paying too much. What you can’t do is turn any investment into a good deal by paying a cheap price." 2019 BRK AGM
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Tren Griffin
@trengriffin
1/ There are always a few people who are too cheap to buy a book like mine on Charlie Munger amazon.com/gp/aw/d/023117… but who want to know the jokes. Since all my book income goes to charity, I'll try anything to make a sale (including freemium). Here's one of the jokes for free:
2/ Wait! You say you want to read more free financial jokes because you are too cheap to buy my Charlie Munger book? Since the marginal cost of tweeting another financial joke is about $0, here's one more:
3/ There's more humor about finance than actual jokes. Jokes are harder to write than quips. Lots of quips are funny, but only to a narrow audience since they are "inside baseball" even on financial twitter. This joke can even be understood by people who trade with bucket shops:
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Karol Cummins
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eric boroian
@eboroian
A company's value is driven by one thing: risk adjusted cash flows

This depends mainly on:

-Growth
-ROIC
-Cost of capital

Outperformance requires anticipating revisions to cash flow estimates. If high returns (& growth) are maintained, there are likely to be revisions higher
To understand this deeply, it’s important to disaggregate cash flow into growth & ROIC, to see how they're linked

Growth=ROIC x Investment Rate

Cash Flow=Earnings x (1–Reinvestment rate)

Rearranged, Investment rate=Growth/ROIC

Cash flow=earnings x (1–Growth/ROIC)
This has important implications. Let’s take an example.

Imagine if a company has very attractive growth opportunities over a 5 year period. Say it can grow at 20% annually. But this growth requires quite a bit of investment (in working capital and capex for instance)
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Karol 🌿
@karolcummins
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Amit Mantri
@amitmantri
Bull markets are a great time for fraudster promoters to make money. If you are a fraudster and also want to benefit from this bull market, here's a thread that explains how you can defraud shareholders and get rich.
1. Have a good story to catch investor's attention. Something like "only listed XYZ company" will help. Has zero value in terms of improving long-term cash flows of the business but is excellent branding for a stock. Change the name of the company to what's booming in the market
2. Draw analogies to D-Mart or other businesses that investors love (next Page Industries maybe?). Doesn't matter if your business is nothing like the ones you are comparing it with.
Read 22 tweets

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