Eldad

In the first year, I see your point. Organic is already included in ROIC. But imagine this: 1. 100 of capital 2. 20% ROIC 3. 10% organic with no additional cost of capital 4. All income is dividend out every year Year 1 22 of income. 22% ROIC Year 2 24.2 of income 24.2% ROIC Year 3 26.6 Year 4 29.26 When you put that into a DCF it is pretty powerful for the intrinsic value. Not sure exactly sure how it equates to ROIC + Organic every year but it’s definitely not double counting as it compounds. Maybe it does assume reinvestment of all income as well. I am guessing ML proved it out arithmetically.

Yes. Cost of capital on the organic is 0 or even negative as the years revenue is prepaid upfront.

Thanks. Interesting for sure

I have FY 2024 EPS of 12.36 which puts them about like always, 34x. I see where Morningstar is trying to say it is at 24x normalized. I guess they are backing out the 1 B acquisition term fee.

I thought that was strange as well. I imagined Buffett being annoyed with him. The guy got pretty much every financial cliche quote all in one letter. These guys really need some new material.

I have not done the work yet. I listened to the serial acquirer conference RedEye did in Spring 2024 and Mohr stood out as completely honest but also eccentric and just kind of weird. He was talking about buying tiny VMS from retiring boomers which sounded great, but then the financials are a bunch of funds and seem overly complex. Figured I would just buy more Topicus when cheap instead.

Yes. See page 45 of CSU thread. Also Mitch Rales owns around 15% of Chapters Group which is a European CSU copycat.

I hear you. Warren Buffett I think hears you, so you are in good company. Just in general people are not thoughtful at all anymore and everyone has lost their minds to a certain extent. If present society was a spoiled child, it would desperately need to be grounded for a couple of months and assigned to hard labor for its own future good. I don’t know when or why it will happen but it’s coming and it actually needs to happen very badly. At same time I can’t really bring myself to raise more than about 10% cash.

Adding 6 justices didn’t happen because of 2 American patriots named Sinema and Manchin. That would have caused a civil war. Actions speak louder than words. Trump says lock her up. Then first week in office says they will not pursue Hillary. Democrats say save democracy then try to jail political opponents. If you remember Biden had boxes of classified documents in his garage (as i am sure almost every President up to Trump did and got away with) The FBI said they would not charge him because “he was senile” and therefore could not stand trail. The FBI was right of course all while the MSM was telling everyone he was “sharp as a tack”. I find many things about Trump to be terrible, but he has an appeal with low propensity voters and previous non voters that allows him to beat Democrats. The current Democrat party is too corrupt to have power IMO.

That is just completely the opposite of how I look at it. Capital allocation decisions are the most important decision management makes. Do you have the power to fire management? No, so you are mainly investing in their decision making. If they have a horrible track record it will most likely be an awful investment. Bottom line is your return is based on the ROE not just the tangible part. Again KHC, horrible company and stock but WB loves the ROTA.

You may not know what I meant by “court packing”. Biden and most Democrat Senators, besides Sinema and Manchin, wanted to change the courts’ make up to 15 justices and add 6 Democrat team players back at the beginning of Biden’s term. Completely changing the rules and harming our “democratic norms” That is not the same as Trump appointing 3 in a term because 3 others retired. “Trump is going to destroy our democratic norms and imprison his political enemies!!” When everyone can see they are actually the ones that do those things. That and the censorship is what caused a left leaning moderate like Musk to go full MAGA.

I guess you mean when he buys a business to be wholly owned by BRK. But that is kind of outside of the bounds of “why don’t more investors care about ROTA” since investors by and large are minority owners of stocks.

Sorry but what are you talking about? Buffett himself doesn’t want to grow Berkshire by acquisitions or he doesn’t want his common stocks to grow by acquisitions? I would argue both of those are obviously wrong. For example, Buffett says Kraft is still a great business because it has a high ROTA. But it paid way too much for Heinz and so it has been stuck for a decade or so. OXY, KO, MCO, KR, KHC they all acquire…. a lot.

Hahahaha Besides Elon, I will add Joe Manchin and Kristen Sinema to the list of left leaning moderates that did their part to save the country. Stopping Biden from packing the supreme court is up there with Elon bringing back free speech.

I mean I think your goodwill should count against you. I want to see your return with your acquisitions in there as well. I typically look at profit margin just because it is easier than calculating ROTA. I can see that ROTA would be slightly better. If you see a company with a giant profit margin and a low ROIC and ROA, then you know they recently paid a huge multiple for a business. See SPGI. Now if the moat is super strong on what they just bought, eventually the ROA and ROE numbers should catch up. If you screen for only high ROIC and ROA businesses, you could miss some great businesses, but those may have suspect capital allocation. Time will tell.