Share this page!

Enter URL or ID to Unroll

You can paste full URL like: https://x.com/threadreaderapp/status/1644127596119195649
or just the ID like: 1644127596119195649

How to get URL link on X (Twitter) App

  1. On the Twitter thread, click on or icon on the bottom
  2. Click again on or Share Via icon
  3. Click on Copy Link to Tweet
  4. Paste it above and click "Unroll Thread"!
  5. More info at Twitter Help
The Investing for Beginners Podcast Profile picture
The Investing for Beginners Podcast
@IFB_podcast
Breaking down the stock market for beginners, using everyday language | Available everywhere | Sign up for Value Spotlight to continue your learning ⬇️
9 subscribers
Jun 20 • 11 tweets • 2 min read
Moats explained simply.

Warren Buffett coined this important investing quality.

"The most important thing to me is figuring out how big a moat there is around the business. What I would love, of course, is a big castle and a moat with piranhas and crocodiles." Image In the world of businesses, a "moat" is something that a company has or does that makes it really hard for other companies to compete with them or take away their customers.
Jun 7 • 13 tweets • 2 min read
Cash flow is king

20 Must Know KPIs to master cash flow.

1. Revenue forecast = revenue y/y expected from business operations. Image 2. Gross Profits - Revenue less COGS (cost of goods sold)

3. Operating Profits - Revenue less COGS less Opex (Operating expenses)

4. Net Income Profits - Revenue less COGS, Opex, and Interest, Taxes

5. Operating Cash Flows (CFFO) - Cash generated from business operations
Apr 19 • 16 tweets • 4 min read
What is Maintenance Capex?

This is one of the most misunderstood area in finance and hopefully we can help make it a bit clearer for everyone.

We have several ways to determine maintenance capex, let's take a look.

🧵⬇️ Image Buffett famously defines maintenance capex in his 1986 Letter as:

"the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume.”
Mar 8 • 8 tweets • 2 min read
1/7 Today we will take a look at the quick ratio, the more conservative indicator of a company's liquidity than the current ratio.

The name stems from the "quick" nature of the assets involved.

Short 🧵⬇️ Image 2/7 The quick ratio helps investors measure its ability to pay its current liabilities without needing to cash out its inventory or use additional debt.

The quick ratio is considered more "conservative" than the current ratio because of the assets involved.
Mar 7 • 7 tweets • 2 min read
What is a bond yield?

How do bond yields work?

It's easier than you think.

Let's learn a little something 🧵⬇️ Image A bond yield measures the return an investor can expect from a bond.

It represents the income generated by the bond as a percentage of its current market price.

You can think of it as a dividend you receive for letting them borrow your money.
Feb 15 • 7 tweets • 2 min read
1/7 All businesses need to invest to grow, even $AMZN.

Net working capital (NWC) helps us understand a company's liquidity, as well funding operations.

Joel Greenblatt uses it as part of his calculations for return on capital.

🧵⬇️ Image 2/7 There are a few ways to calculate NWC, let's look a three:

NWC = Current assets - current liabilities

or

NWC = Current assets (less cash) - Current liabilities (less debt)

or

NWC = Accounts receivable + inventory - accounts payable
Feb 8 • 7 tweets • 2 min read
1/7 How do you read a 10-k if you only have 30 minutes a day or less?

Reading the 10-k or other financial docs remain the #1 way to learn about a biz and investing.

Below is my method if I lack time.

🧵⬇️ Image 2/7 Step 1: Read the biz description. If I don't understand, I throw it in the too hard pile and move on to the next company.

If you don't understand how a company makes money we will struggle to analyze or value the biz. We don't have to swing at every pitch and we can move on.
Jan 31 • 8 tweets • 2 min read
Understanding free cash flow is vital for investors.

Professor Damodaran is the 🐐 of valuation.

He defines free cash flow into 2 types:

- Free Cash Flow to Equity
- Free Cash Flow to Firm

Let's learn more. Image This short thread will outline some important ideas.

For deeper understand, check out Professor's free classes on Yoube and his website, Damodaran.com
Jan 18 • 11 tweets • 3 min read
1/11 1. What is Free Cash Flow to Equity (FCFE) and why is it important in valuing companies?

FCFE represents the base of many calculations using a DCF to value a company.

Below we will uncover how to calculate FCFE.

🧵⬇️ Image 2/11 FCFE represents the cash flow available to shareholders after we account for capital expenditures and net debt issued.

Many argue, including me, FCFE remains the most important metric representing the fair value of Google, for example.
Jan 1 • 9 tweets • 2 min read
1/9 Today's show thread will focus on Free Cash Flow to the Firm (FCFF).

FCFF represents the base of most calculations using a DCF to value a company.

Below we will uncover how to calculate FCFF.

🧵⬇️ Image 2/9 FCFF represents the amount of cash flow available to shareholders after we account for depreciation, taxes, working cap, & investments.

Many would argue, including myself, FCFF remains the most important metric representing the fair value of Google, for example.
Dec 28, 2024 • 11 tweets • 2 min read
ROCE broken down

Discover the power of Terry Smith's favorite metric.

ROCE, or return on capital employed can help you find great potential investments.

Let's learn how below 🧵⬇️ Image Return on Capital Employed (ROCE) is a financial ratio that measures a company's profitability and efficiency in generating returns from the capital it employs.
Dec 27, 2024 • 10 tweets • 2 min read
What are changes in working capital?

Changes in working capital help explain how a company uses its assets to generate growth.

It also greatly impacts cash flows; let's look a little deeper.

🧵⬇️ Image So, what are changes in working capital, and what does it mean?

**Working capital is not changes in working capital.**

The simple definition of working capital is:

💰Current assets – current liabilities
Dec 25, 2024 • 13 tweets • 3 min read
Capital allocation is job number one for CEOs

How we can measure capital allocation?

Understanding ROIC is key.

Let's learn more ⬇️⬇️ Image We will define the formula, and inputs and briefly discuss why. Keep in mind there are a gazillion ways to determine ROIC; this is my fav.
Dec 21, 2024 • 10 tweets • 2 min read
FCF Yield > Earnings Yield

But what is FCF (free cash flow) yield?

Let's dive in and learn more ⬇️🧵 Image The concept of Free Cash Flow (FCF) Yield is a vital indicator used by investors to evaluate the financial health and potential return on investment of a company.
Dec 18, 2024 • 14 tweets • 3 min read
Want to find quality companies?

Using ROIIC is a great place to start.

Return on Incremental Invested Capital helps us measure the change in ROIC and tells us how efficiently a company reinvests its capital.

Let's breakdown ROIIC below. 🧵⬇️ Image Let's start with a quick primer of ROIC, to calculate the formula, we use:

Return On Invested Capital = NOPAT / Invested Capital

The numerator equals:

💰NOPAT = Net Operating Profit (1 - tax rate)
Dec 6, 2024 • 9 tweets • 2 min read
ROIC > WACC

Indicates value creation for companies. Let's learn more...

𝗥𝗢𝗜𝗖 equals return on invested capital. 𝗪𝗔𝗖𝗖 equals weighted average cost of capital.

Why is this important?

First, a quick definition of each: Image 𝗥𝗢𝗜𝗖 measures a company's 𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝘆 𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝘁𝗼 𝗶𝘁𝘀 𝗮𝘀𝘀𝗲𝘁𝘀.

The higher the number, the more efficiently Microsoft uses its assets to generate revenue growth.

We can calculate ROIC by:

ROIC = NOPAT / Invested Capital
Dec 4, 2024 • 12 tweets • 3 min read
A Thread on Margin of Safety.

It's late 1950s in a bar in Omaha.

Warren Buffett sat in the dimly lit corner of the Omaha bar, nursing a bourbon. Image The clinking of glasses and hushed conversations formed a backdrop, but he was lost in thought, reminiscing about a lesson he had learned early in his investing career—the margin of safety.

In his younger days, he had been eager, like a bull charging into the market.
Nov 27, 2024 • 12 tweets • 2 min read
Changes in working capital explained simply. Image So, what are changes in working capital, and what does it mean?

𝗪𝗼𝗿𝗸𝗶𝗻𝗴 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 𝗶𝘀 𝗻𝗼𝘁 𝗰𝗵𝗮𝗻𝗴𝗲𝘀 𝗶𝗻 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗰𝗮𝗽𝗶𝘁𝗮𝗹.

The simple definition of working capital is:

💰Current assets – current liabilities
Nov 20, 2024 • 11 tweets • 2 min read
Want to learn how to value companies?

Using Free Cash Flow to the Firm is one of the best ways.

Below we'll find out how to calculate FCFF. Image FCFF represents the base of most calculations using a DCF to value a company.

FCFF represents the amount of cash flow available to shareholders after we account for depreciation, taxes, working cap, & investments.
Nov 15, 2024 • 12 tweets • 2 min read
15 Rates every investor needs to know and understand.

Ranging from stocks and real estate to bonds. These rates will help you manage your investments.

1. 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲: Cost paid for borrowing money, expressed as a percentage of the total loan amount. Image 2. 𝗗𝗶𝘀𝗰𝗼𝘂𝗻𝘁 𝗥𝗮𝘁𝗲: Rate used to calculate present value of future cash flows in discounted cash flow analysis.
Nov 13, 2024 • 13 tweets • 2 min read
FCF 101

How to analyze free cash flow 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗙𝗿𝗲𝗲 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄?

- 𝗗𝗲𝗳𝗶𝗻𝗶𝘁𝗶𝗼𝗻: Free Cash Flow (FCF) is the amount of cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

It's a key indicator of a company's financial health.