Posts In: Premium Articles-01

Geoff Gannon September 6, 2017 Premium Articles-01

Hold Cash: Wait till You Get Offered 65 Cents on the Dollar

A Focused Compounding member who fears the stock market is expensive posted this comment: “Hi Geoff, S&P today is expensive based on TTM PE of 24 and CAPE of about 30. An investor whose holdings consist entirely of stocks outside S&P500, will still see a drop in the prices of her equities if the S&P falls even if she has bought her holdings significantly below their estimated fair values. In your opinion, what’s the best way to position oneself going forward with the goal of…...

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Geoff Gannon September 5, 2017 Premium Articles-01

Weight Watchers (WTW): Mistakes Made Over 4 Years of (Emotional) Volatility

I lost a lot of money in Weight Watchers. Let’s look at why that was.   As I write this article, Weight Watchers (WTW) stock is at $44.30 a share.   I bought my shares at $37.68 a share in 2013 and sold them (in March of 2017) at $19.40. So, I realized a loss of 49%. I also tied up money for about 3.5 years. During this same time period, the S&P 500 returned about 12% a year. I probably could have found something…...

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Geoff Gannon September 5, 2017 Premium Articles-01

Unleveraged Return on Net Tangible Assets: It Only Matters When Coupled with Growth

The best way for you to understand unleveraged return on net tangible assets is to look at the reports in the Library section of Focused Compounding. I’m going to give you the basic formula for return on unleveraged net tangible assets here, but it won’t make as much sense as seeing the calculation for yourself by looking down each yearly column of the “datasheet” on one of the 20+ reports in the Focused Compounding library.   The definition of return on unleveraged net tangible assets…...

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Geoff Gannon August 29, 2017 Premium Articles-01

The Market is Overpriced: These 3 Stocks Aren’t

Most stocks are now overpriced. Historically, a normal price for a stock has been about a P/E of 15. And historically, stocks have outperformed other assets. Therefore, it makes sense to buy above average businesses when their shares trade at a P/E of 15. Right now, I see 3 above average businesses trading at about a P/E of 15: Cheesecake Factory (CAKE) Omnicom (OMC) Howden Joinery I’m not buying any of these stocks personally right now. However, if you asked me right now whether or…...

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Geoff Gannon July 27, 2017 Geoff's Answers, Premium Articles-01

How to Read Between the Lines of a 10-K

Question “I have read some of your Singular Diligence content and one of the most interesting parts of the reading are the notes that you and Quan used and published in those reports. So one of the most remarkable things that I have noticed in the notes is that you did not use a lot of information in the annual reports. And this sounds intriguing to me since I am a regular reader of your blog and you have always emphasized how important it is…...

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Geoff Gannon July 17, 2017 Geoff's Answers, Premium Articles-01

How to Judge a Company’s Bargaining Power With its Customers and Suppliers

A Focused Compounding member asked me this question: “…what are the factors we should be thinking about when assessing the bargaining power of a given business relative to its customers and suppliers?” In an earlier memo, I talked about “market power”. My definition of market power is the ability of a company to make demands of its customers or suppliers without fearing that such demands will end their relationship. Why would a supplier or customer agree to demands without considering ending the relationship? Dependency. Recently,…...

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Geoff Gannon June 21, 2017 Premium Articles-01

Finding the Right P/E Multiple – Or How to Handicap a Stock

First, a huge warning about the tables I’ll be showing you in this memo. The P/E multiples shown here are useful as a theoretical tool for getting some idea of how important durability – being able to know a stock will still be turning an annual profit more than 5 years from now – and growth (being able to know a stock will compound intrinsic value faster than the overall market) is in finding the right P/E for a stock. Basically, what I’m saying here…...

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Andrew Kuhn June 13, 2017 Premium Articles-01

A Blast from the Past: Warren Buffett’s 1977 Shareholder Letter

Whenever someone comes to me asking for advice on how to get started in investing, the first place I direct them to is reading all Warren Buffett’s Berkshire shareholder letters. It is no secret that his letters have tons of golden investing-wisdom nuggets laid upon them. I have read them many times but interestingly enough, I always take something new away from them every time I reread them. In this series, we’re going to go all the way back and start from the beginning and…...

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Geoff Gannon May 29, 2017 Premium Articles-01

Over the Last 17 Years: Have My Sell Decisions Really Added Anything?

I get a lot of emails from people saying that my strategy has changed – I’ve become more of a growth investor and less of a value investor – over time.   It’s true that the investments I’ve made in recent years have definitely changed.   But, my philosophy has changed less than it would appear from my stock picks. I concentrate heavily and go where I see opportunities I consider “nearly certain” rather than being the highest return opportunities based on pure probabilities.  …...

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