The blog
Understanding value investing, without the needless jargon.
Intrinsic Value from Cash Flows: Understanding DCF (and Distrusting Its Precision)
A company is worth the cash it will produce, brought back to today. That is the whole idea of a DCF. Here is how it works, where most of the value hides, and why its precision is an illusion.
Read →Net-Net Stocks (NCAV): Graham's Deep-Value Bargain, Calculated
Buy a business for less than its cash and inventory net of every debt, and get the factories, the brand, and the profits for nothing. That is the net-net, Benjamin Graham's most extreme bargain. Here is how to find one, and why so few survive contact.
Read →The Economic Moat: What Actually Protects a Company's Profitability
A highly profitable company attracts competition, which erodes that profitability, unless something protects it. That something has a name: the moat. Here are its five forms, and how it reads in the numbers.
Read →Joel Greenblatt's Magic Formula: The Recipe, the Math, and the Blind Spots
Two rankings, one sum, and a list of stocks to buy. Joel Greenblatt's Magic Formula fits on a postcard. Here is how it actually works, and what it cannot see.
Read →The Altman Z-Score: Predicting Bankruptcy From Five Ratios (With a Worked Example)
In 1968, a young finance professor asked whether five numbers from a balance sheet could predict a bankruptcy two years out. They could — and the formula still runs today.
Read →The Piotroski F-Score: A 9-Point Test of Financial Strength (With a Worked Example)
A Chicago accounting professor asked a simple question: among cheap stocks, can the financial statements alone tell the survivors from the sinking? His answer was nine yes-or-no tests, one point each.
Read →Reading a Balance Sheet Like an Investor: The Seven Lines That Decide
A balance sheet runs to hundreds of lines. Seven are enough to tell whether a company can survive a bad year — and to avoid most of the avoidable accidents.
Read →Margin of Safety: What It Actually Protects You From
Three words everyone quotes and almost nobody puts a number on. A margin of safety does not protect the company — it protects you from your own estimate.
Read →Value Traps: Seven Signs a Cheap Stock Is a Trap
Not every discounted stock is an opportunity. Some are cheap because they deserve to be — and will stay that way. Here is how to spot them before you buy.
Read →Value Investing: The Complete Guide (Graham, Buffett, and What Changed Since)
Buying a dollar for fifty cents — the phrase is famous, the method less so. Here is how it actually works, what it demands, and why the original version is no longer enough.
Read →The Graham Number: Formula, Worked Example and Real Limitations
One square root, two balance-sheet figures, and a ceiling price. The Graham Number is the simplest valuation benchmark there is — provided you know what it does not measure.
Read →The value investing letter
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