Here’s a great recent interview with Warren Buffett at CNBC discussing a number of topics including his value investing mindset. Here’s an excerpt from the interview:
BECKY QUICK: I know you’re like Dr. Spock. You’re completely emotionless, when it comes to dealing with market moves. But is there any part of you that gets a little queasy, when you see that you’ve lost $4 billion in a day?
WARREN BUFFETT: Not in the least. No. I mean, it makes me– assuming I like the business. It depends which ones they are. But overwhelmingly– during the fourth quarter that things were going down, A, they were buying out their own stock. So I’m actually making money that day, you know, without laying out a dime. And then secondly, I can buy more of some, although a lot of ’em, I’ve got that 10%– problem with. But I– mean, there are certain stocks I would’ve kept buying, except I was bumping up against– the 10%. But no, I– mean, if you paid X dollars a pound for hamburger yesterday, and you go in today, and now, it’s at 80% of X, maybe you have a little hamburger left in your refrigerator or something. Do you tear your hair out over that? Or do you say, “My God, you know, this is terrific. The price is cheaper”? What– else in the world don’t you like to buy cheaper than you’re paying the day before?
BECKY QUICK: That’s a fair point–
WARREN BUFFETT: If you’re gonna– if you’re gonna keep buying it.
BECKY QUICK: That’s a very logical way of looking at things, (LAUGH) very rational way.
(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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