Analyzing Capital Expenditures
csinvesting is definitely a blog worth reading. An article on "Analyzing Capital Expenditures-Buffett and Sears Case Study" points to a scribd document of his. Sketch notes below.
His opening quote was great: "If you want to beat the S&P 500, here's what you do, you buy 500 stocks, and then you sell the airlines. You should do better." - Tom Gayner
owner earnings = a) net reporting + b) depreciation, amortisation - c) capex (maintenance & growth)
if a+b>c, then company is earning sufficient amount for the shareholders. I think that capex should only be maintenance capex (??)
You have to pay less for companies with a lot of "restricted earnings". Companies with a lot of restricted earnings often have high asset/profit ratios. They're "restricted" in the sense that inflation requires that some of the earnings must be ploughed back into the business.
owner earnings = net income + depreciation + depletion + amortization - capital expenditures - additional working capital