From Greenblatts little book that beats the markets
-If the gum shop earns 1.2M last year. 1M shares. How much to buy at? $12 seems good for 10% earnings yield. But main problem in investing is determining if we will get $1.2 per year going forward as well and if earnings could be higher going forward.
-There are many ways to define what makes a business good or bad- quality of products or services, loyalty of customers, value of its brands, efficiency of its operations, strength of competitors, long term prospects of a business.
-If it cost jason $400K to build each of his gum stores and if each store earned him $200K, he is earning a retun on capital of 50%.
-Buy at high earnings yield + high ROIC
-If the gum shop earns 1.2M last year. 1M shares. How much to buy at? $12 seems good for 10% earnings yield. But main problem in investing is determining if we will get $1.2 per year going forward as well and if earnings could be higher going forward.
-There are many ways to define what makes a business good or bad- quality of products or services, loyalty of customers, value of its brands, efficiency of its operations, strength of competitors, long term prospects of a business.
-If it cost jason $400K to build each of his gum stores and if each store earned him $200K, he is earning a retun on capital of 50%.
-Buy at high earnings yield + high ROIC
-Graham suggested that by buying a group of these bargain stocks, investors could safely earn a high return without worrying about a few bad purchases and without doing complicated analysis of individual stocks.
-Magic Formula : IT takes also stocks and ranks them based on earnings yield. It also takes the same list and ranks them on ROIC. Then the two ranks are added together for a final list that is ranked from highest to lowest combined score.
-Magic Formula : IT takes also stocks and ranks them based on earnings yield. It also takes the same list and ranks them on ROIC. Then the two ranks are added together for a final list that is ranked from highest to lowest combined score.
