Here’s some more classic Munger. During his USC Law Commencement Speech, Munger provides some insights into counteracting the self serving bias, which includes overspending ones income, saying:
(6:38) “Another thing of course that does one in is the self-serving bias to which we’re all subject.”
“You think that your ‘little me’ is entitled to do what it wants to do and for instance why shouldn’t the true ‘little me’ overspend my income. Well there once was a man who became the most famous composer in the world but he was utterly miserable most of the time.”
“One of the reasons was he always overspent his income – that was Mozart.”
“If Mozart can’t get by with this kind of asinine conduct I don’t think you should try.”
(Source:YouTube)
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The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.
It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization.
The Acquirer’s Multiple® is calculated as follows:
Enterprise Value / Operating Earnings*
It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com.
The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT.
Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations.
Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up.
Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC.
He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener.
All metrics use trailing twelve month or most recent quarter data.
* The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
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