Category Archives: Investment Principles

Buffett’s Retained Earnings Test

Warren Buffett uses his retained earning test, where he looks for every $1 of retained earnings to become at least $1 market value.  This is a novel idea, basically saying that a business should be wary of the returns on … Continue reading

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Rights Offerings

I’m writing this to inform investors about the effects of a rights offering on their holdings before and after the completion of one.  I recently invested in a business that has a history of using rights offerings to raise money … Continue reading

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Du Pont Model: Dissecting the Fundamentals behind Return on Equity

You can see above an image of a Du Pont model I took from Google Images.  This is one of the most important ways to assess a company’s performance and find out why changes have occurred with a business’ fundamentals.  … Continue reading

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Valuation

I am writing this to have a written record of my current valuation methods and to instruct those who are perhaps looking for a fresh viewpoint. I started reading about investing two years ago this month.  In my search for … Continue reading

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Operating Leverage Explained

I am writing this because not too many people I speak with have any idea about operating leverage.  Everyone knows about financial leverage (debt), but somehow operating leverage slips under their radar.  This article is meant to be an introduction, … Continue reading

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Working Capital Explained

I am not writing this as an over-arching discussion of every possible way to look at working capital; there are many ways to view it in a business and I want to only have a simple discussion about its affect … Continue reading

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