Sublime

In 1938, John Burr Williams published a book called The Theory of Investment Value, a seminal articulation of the usefulness

What makes this company grow? Where do (and

These differing results tell an important capital allocation parable: the value of being in businesses with attractive returns on capital, and the related importance of getting out of low-return businesses.

only purchase companies if the price translated into a maximum multiple of five times cash flow after the easily quantifiable benefits from programming discounts and overhead elimination had been realized. This analysis could be done on a single sheet of paper (or if necessary, the back of a napkin). It did not require extensive modeling or project

But firms that are able to generate growth with less capital should be more valuable, as should firms that take less risk.

There’s nothing wrong with investing in the entrepreneurs of the world, as long as you know what you’re getting into. A profitability matrix can help you separate your long shots from your core holdings.

competition drives valuation.

While at New Mexico State, I invested money from book royalties and gambling winnings in stocks. But I was ignorant of the market as well as unlucky. The results were poor. I wanted to do better. Investments presented a new type of uncertainty, but the theory of probability might help me make good choices.