Wednesday, August 8, 2012

Notes taking from reading- essentials of warren

1) Type of business, franchise and commodity. (Warren choice is company at stage 3 and 4 of their devlopmemt)

i)Franchise,

No regulation

No substitution

Pricing flexibility

ii) Consistent operating history

-> NO makeover of product or change in managment

iii) Managment

Candid assessment

How they deal with extra cash. ROE better than cost of capital, ROE: ROA, the bigger the better Otherwise, return thro dividends or share buyback

Impact of PPE, if >50% of total assets, consider capital intensive

performance,their plan and the execution

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