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Fundamental Risk vs Price Risk: Seeing Beyond the Market Noise
Introduction: Most investors fear volatility. When the price of a stock drops 10% in a day, it feels like something is fundamentally wrong. But is it? Understanding the difference between fundamental risk and price risk is one of the most important mental shifts you can make as an investor. What Is Fundamental Risk? Fundamental risk…
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Is Investment a Marathon or a Sprint?
When it comes to investing, one common question stands out: is it a fast-paced race to quick returns or a slow, enduring journey? The truth is, investing isn’t just a financial decision — it’s a mindset. And like all great mindsets, it thrives on clarity of purpose and discipline over time. The Sprint Mentality In…
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What is Dirty Surplus Income?
The Hidden Line Between Accounting Reality and Economic Reality When analyzing a company’s financial health, most investors look to net income. But net income doesn’t always tell the full story. Some gains and losses sneak around the income statement — and that’s where dirty surplus income comes in. The Clean vs. Dirty Surplus Concept In…
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Businesses – The Great, the Good and the Gruesome
When evaluating businesses, it’s essential to recognize which ones create lasting value and which ones struggle to stay afloat. Inspired by Warren Buffett’s insights, let’s break them down into three categories: The Great Business A great business has a strong competitive edge—what Buffett calls a “moat”—that protects its profits. This could be a globally trusted…
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What Is Your Free Cash Flow Per Month?
Introduction Have you ever wondered what the financial health of your personal life looks like? In the world of business, companies use a key metric called Free Cash Flow (FCF) to measure how much money is left after covering all necessary expenses. But what if we applied this idea to personal finance? Understanding your “free…
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What Is Your Moat?:
What Is Moat? “A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns. Therefore, a formidable barrier such as a company’s being the low-cost producer (GEICO, Costco) or possessing a powerful…
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How to Use the Earnings Yield Yardstick?
What is Earnings Yield? Earnings yield is the ratio of a company’s earnings to its market price. In essence, it shows what percentage of your investment in a stock is ‘earned’ back annually in profit. The formula is : Earnings Yield = (Earnings per Share (EPS) / Stock price) × 100 For example, if a stock is priced at…
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Margin of Safety: An Engineering Perspective
“The margin of safety is always dependent on the price paid. It is available for absorbing the effect of miscalculations or worse than average luck.” — Benjamin Graham, The Intelligent Investor Source: https://www.sciencedirect.com Introduction I recently attended a seminar on compressors, where we discussed anti-surge control and its implementation through control systems. Compressors are critical…
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Camel vs Elephant: A Comparison Through Capex:
I love elephants as animals because they are huge and look majestic. I’ve heard many good things about elephants, such as their ability to walk long distances daily and their exceptional memory. On the other hand, camels might not look as impressive, with their thin legs, uneven backs, and large lips. But camels are renowned…
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Pizza A vs. Pizza B: A Simple Way to Understand Outstanding Shares:
The picture above shows two pizzas, Pizza A and Pizza B. Both are the same size, but Pizza A has 8 slices, while Pizza B has 16 slices. Pizza A can be shared among 8 people, and Pizza B can serve 16 people, though with slightly smaller portions. Which would you prefer: Pizza A or…
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