Thread by @trengriffin

1/ If you were watching earnings releases the past two weeks and didn't see that businesses with key intangible assets outperformed expectations, you weren't paying attention. Pricing power created by intangible assets is not captured by "earnings" and even less so by book value.

2/ Businesses that benefit from intangible assets are far more like to operate effectively even with work being done by employees working from home. If the business must create its value from physical capital assets they are more likely to have a hard time continuing to operate.

3/ Accurate accounting and statistical measures of the value creation cababity of modern intangible assets are almost nonexistent.

Investors who understand this can outperform benchmarks by buying substantantly undervalued businesses with key value creating intangible assets.

4/ "GAAP requires immediate expensing of SG&A... evidence suggests the capital market only partially recognizes the intangible asset value created by SG&A expenditure." aaapubs.org/doi/abs/10.230…

Have you seen examples of the value of intangible assets lately in stock prices?

5/ "accounting regulators were—and still are—asleep at the wheel, treating the value- creating intangible investments as regular expenses. ... earnings, assets, and market multiples (P/E, book-to-market ratio) do not reflect intrinsic value creation." fundresearch.de/fundresearch-w…

6/ "Why Are Investors Paying More Attention to Free Cash Flows?"

"We document an upward trend in investor responsiveness to free cash flow surprises over time. Market response is especially strong for newer firms with high levels of intangible assets."

hbs.edu/faculty/confer…