Matt Harbaugh
Investor/operator posting about valuation levers (growth, margins, reinvestment, risk) directly relevant to CFO capital strategy and ROI decisions.
Three Buffett Principles That Transformed Li Lu’s Life
Li Lu on the 3 lessons he learned from Warren Buffett that changed his life
DCF Benefits Skilled Analysts; Expertise Outweighs Model Choice
Michael Mauboussin on the DCF model "Skilled analysts were more accurate when they used a DCF model than when they used multiples, especially for firms that are hard to value. By contrast, the less-skilled analysts were worse off using a DCF...
Tech Industries Show Wider ROIC Gaps Than Consumer, Industrial
Michael Mauboussin on ROIC by industry: "The dispersion of returns is generally lower for industries in the consumer and industrial sectors and higher for industries in the technology sector." "A company’s ROIC is determined in part by the industry it competes...
ROIC Misleads M&A Value: Costs Immediate, Benefits Delayed
Michael Mauboussin on why ROIC is a poor measure when it comes to M&A "ROIC is an inappropriate way to assess M&A because the cost (invested capital) is reflected immediately and the benefit (NOPAT) comes over time. Most deals, even those...
ROIC's Denominator: Net Assets vs Financing Mix
Michael Mauboussin on the 2 ways to calculate ROIC "You can think of invested capital, the denominator of the ROIC calculation, in two ways that are equivalent. The first is the net assets a company needs to generate NOPAT. The second...
Value Emerges When Every Dollar Beats Cost of Capital
Michael Mauboussin on the One Dollar Test "A company creates value when one dollar invested in the business is worth more than one dollar in the market. This happens when the firm is able to make investments that generate a return...
Buffett's 4 Stock Rules: Understand, Prospects, People, Price
Warren Buffett shares his 4 criteria for buying a stock in this shareholder letter from 1977 "We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and...
Holding Decades, Not Churning, Signals Strong Process
"We expect to hold positions for 10-plus years. To us, constant churn is a telltale sign of a poor investment process that prioritizes short-term results.” - Dev Kantesaria
Tech Industries Show Wider ROIC Gaps than Consumer/Industrial
Michael Mauboussin on ROIC by industry: "The dispersion of returns is generally lower for industries in the consumer and industrial sectors and higher for industries in the technology sector." "A company’s ROIC is determined in part by the industry it competes...
ROIC Misleads M&A Value by Ignoring Timing
Michael Mauboussin on why ROIC is a poor measure when it comes to M&A "ROIC is an inappropriate way to assess M&A because the cost (invested capital) is reflected immediately and the benefit (NOPAT) comes over time. Most deals, even those...
Great Thesis Beats Diversification: Concentrate Your Bets
Stan Druckenmiller on diversification "Diversification is really overrated. If you've really got a great thesis, and you've analyzed the risk reward, put all your eggs in a couple baskets, or in one basket, and then watch the basket very closely."
Insider Buying Needed to Boost Confidence in Constellation
David Poppe on not adding to $CSU "Constellation has always said acquisitions provide higher returns than share repurchase, but senior executives are not rushing to buy either... I have my reasons for believing Constellation's business will prove durable, but I would be...
Holding MU Would've Yielded 10x Gains, Pabrai Missed
A few years ago, $MU was Mohnish Pabrai's largest holding at 80% but sold it in 2Q23 Hindsight is 2020, but if he simply just did nothing and held, he would be up ~10x
Four Key Steps to Measure Investment Performance
Michael Mauboussin's 4 steps to measuring performance 1. Security selection 2. Position sizing 3. Portfolio activity 4. Opportunity set
Index Funds Act as Momentum, Ignoring Quality, Distorting Markets
Terry Smith on how index fund investing is not passive investing but rather a momentum strategy "The increasing proportion of equities held by index funds are invested without any regard to the quality or valuation of the shares bought, which produces...