Over the years Warren Buffett has spoken about the absurdity of borrowing money to buy stocks. Here’s a great short video that encapsulates his thoughts. Our favorite quote from the clip is:
(1:47) – “My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies, and leverage. Now the truth is, the first two he just added because they started with ‘L’ – It’s leverage.”
(Source:CNBC)
For more articles like this, check out our recent articles here.
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.”
Emerging markets hedge funds have done poorly this year, with one exception being North Asset Management's Emerging Market Fund. According to a monthly investor letter reviewed by ValueWalk, the... Read More
DES MOINES, Iowa--(BUSINESS WIRE)--Berkshire Hathaway Energy today announced it has completed the purchase of Dominion Energy’s natural gas transmission and storage business, exclusive of Questar Pipeline Group. The transaction... Read More
Charlie's Investing Principles - From Poor Charlie's Almanack 3rd edition, pages 73-76
Get The Full Series in PDF
Get the entire 10-part series on Charlie Munger in PDF. Save it to... Read More
Citron Research has a new sell recommendation on Organovo Holdings Inc (NYSE: ONVO), which can be viewed below.
At the present moment, Organovo (NYSEMKT:ONVO) is a money-losing highly speculative biotech company which has... Read More
The chart below shows the relative performance (blue, left-hand side) and underperformance from the nearest peak (orange, right-hand side) of value-weighted decile portfolios formed on price-to-cash flow from 1951... Read More
Graham Neilson of Cairn Capital discusses the future of fixed income market after the run of high volatility in June. The credit focused firm that runs an asset management and advisory business,... Read More
Today, Apple Inc.'s (NASDAQ:AAPL) market cap reached $500 billion which is a record high for the already most valuable company in the world. However, Apple is not the first... Read More
Conventional earnings-based security analysis has lost much of its usefulness according to Feng Gu and Baruch Lev, who have published their findings on the topic in a recent issue of... Read More