This was a fun read. I think the concept of ‘owner earnings’ is super important and I am surprised how little it gets spoken about today. I always adjusted stated earnings to find the underlying cash generation power. When I bought 5% of Adidas, Wall Street was focused on stated earnings which had a number of 1x items that were depressing the number. But the company also had these big non-cash depreciation and amortization charges from past spending and capex was artificially high as they were finishing a HQ remodel. Once I adjusted for those items, we were paying less than 10x for earnings that we thought would grow high singles in the worst case for the next 3-5 years. I am excited to look at Ring more closely.
Thanks T.S.! It was fun to write, and I’m focusing on finding other, similar names in today’s market. It’s pretty amazing what you can find by simply doing the reading. If you believe too much in efficient markets, you could laugh at the idea that management guidance was out there in public, the company was well on its way to hitting targets, yet the stock price didn’t seem to reflect it.
This was always the signal for me. My best investments always seemed too easy. I would spend so much time scratching my head and asking why no one else noticed what I saw. It was almost always down to time horizon. People want what will work in the next 3-months but the big money is made in the long-term compounders. Like the companies you keep finding!
This was a fun read. I think the concept of ‘owner earnings’ is super important and I am surprised how little it gets spoken about today. I always adjusted stated earnings to find the underlying cash generation power. When I bought 5% of Adidas, Wall Street was focused on stated earnings which had a number of 1x items that were depressing the number. But the company also had these big non-cash depreciation and amortization charges from past spending and capex was artificially high as they were finishing a HQ remodel. Once I adjusted for those items, we were paying less than 10x for earnings that we thought would grow high singles in the worst case for the next 3-5 years. I am excited to look at Ring more closely.
Thanks T.S.! It was fun to write, and I’m focusing on finding other, similar names in today’s market. It’s pretty amazing what you can find by simply doing the reading. If you believe too much in efficient markets, you could laugh at the idea that management guidance was out there in public, the company was well on its way to hitting targets, yet the stock price didn’t seem to reflect it.
This was always the signal for me. My best investments always seemed too easy. I would spend so much time scratching my head and asking why no one else noticed what I saw. It was almost always down to time horizon. People want what will work in the next 3-months but the big money is made in the long-term compounders. Like the companies you keep finding!
Gonna print this out and hang it on my wall.