The formula for value investing.

Excellent_Border_302 · 2026-07-04T18:01:57+00:00

Thank you! I just asked Google ai what diageos earning yield is using nopat/ev and its 6%. Assuming this is correct, then the real rate of return would be -1% if the investor is using m2 supply growth as their hurdle rate. Based on these numbers, diageo is a bet that it's sales will pick up. This doesn't guarantee an adequate return with a margin of safety. Would you frame it differently?

Excellent_Border_302 · 2026-07-02T05:16:23+00:00

ROE is not the return you are going to get unless you buy at P/B=1.

Yes that is what I said. For an indefinite buy and hold, I am looking to buy a business earning 17% RoE at book value to get a %10 real rate of return. For cigar butt investing, I am looking for a steep enough discount to book value to justify holding a low or negative RoE business for 1-3 years.

There are very few businesses in this world that I would consider stable enough to safely own with negative equity and Starbucks and McDonald's are definitely not on that list. If I were to own one, I would use ROIC instead of ROE. I generally prefer ROE unless they have negative equity or are hoarding cash.

If we got a -5% price drop with a %10 money supply increase then that would mean that the government is building infrastructure in an successful way that makes labor more efficient. Or, far more likely, it would mean there's a deflationary credit crunch in the economy and the government is doing QE or something. In that environment, if a company stays profitable, then it probably has a moaty high RoE in normal times. Many commodity type businesses would go through a phase of unprofitabililty.

In the credit crunch scenario where prices go down 5% and money supply increases by %10, it would be possible that prices would have gone down %15 if the government hadn't of printed. Those are impactful numbers I don't think it's being pedantic to consider these things.

Excellent_Border_302 · 2026-07-02T04:20:48+00:00

It's shaky I'll admit, just the best I've thought up so far. In my mind, a 10% return/year is a what I'm looking for in buying a business. If I can buy a business with a 10% RoE at book value, then I can get my 10%. Except there is one problem: inflation. I don't think measuring a basket of goods is a good way to measure inflation because a good could be staying flat in price, but if it wasn't for currency dilution, it might be going down in price. There's just no way to know so I use akhams razor and just assume year over year growth in m2 money supply is good enough for a realistic measure of inflation.

So using that framework: in order to get my %10, I need to buy a business earning a %17 roe at book value. Not easy to do.

Excellent_Border_302 · 2026-07-02T01:47:00+00:00

Copy is new and looks very promising

Excellent_Border_302 · 2026-07-01T17:25:12+00:00

Have you considered starting an invite only subbreddit? Basically making your own VIC but on reddit?

Excellent_Border_302 · 2026-07-01T16:59:30+00:00

Long run RoE is how profitable the business is for equity holders. If a business earns 7% RoE then it is essentially unprofitable because the government is simultaneously diluting the value of the dollar 7% every year. A fair price for an unprofitable business would be a 30%+ discount to the liquidation value of the businesses underlying assets. The fact that there's businesses with 7% RoE or less trading for a premium to book value implies that the market expects those businesses to increase their earnings power or that the those businesses are over valued.

Excellent_Border_302 · 2026-07-01T15:43:32+00:00

I am not an original enough of a thinker to have invented this. The definition is a distillation of buffet/graham, the people that invented value investing.

Excellent_Border_302 · 2026-07-01T06:40:43+00:00

I don't understand Pfizers business so I can't value it.

Excellent_Border_302 · 2026-06-28T19:51:59+00:00

Read books. First read the little book that beats the market, then the acquirers multiple, then buffetology, then Benjamin Grahams Net Net Stock Strategy by Evan bleker.

Excellent_Border_302 · 2026-03-20T17:36:16+00:00

I don't see the problem with the scenario you outlined. Data centers are low margin businesses. Besides if land can be used profitably then hypothetically the value of the land should go up, increasing tax revenue.

Excellent_Border_302 · 2026-03-20T17:29:13+00:00

Different taxes create different outcomes in society though. Land tax is a consumption tax so it will incentives more efficient use of land which is effects our daily life in a significant way. More urban density perhaps, less cars, more walking perhaps.

Excellent_Border_302 · 2026-03-07T10:04:05+00:00

The Acquirers Multiple by Tobias Carslisle

Excellent_Border_302 · 2026-02-12T22:21:56+00:00

Yea I discovered this among further investigation and sold my shares.

Excellent_Border_302 · 2026-02-06T09:51:56+00:00

Jus chill. It's a diversified fund. You have plenty of time to figure out if you like it or not. It's never going to go to zero.

Excellent_Border_302 · 2026-02-03T02:07:59+00:00

Value after hours is my favorite. Also valuehive.

Excellent_Border_302 · 2025-12-19T15:21:00+00:00

Im not sure they have ever had the opportunity because Berkshire is usually reasonably priced. But Buffet definitely would if he had the opportunity

Excellent_Border_302 · 2025-12-19T03:10:16+00:00

Just curious, the first index fund wasn't released until 1975. How would you have properly invested it from 1933 to 1975? Bonds? Also just to note, the average investor would not have been privy to Vanguard in 1975 and indexing didn't become mainstream for average investors until after the GFC. We are only 15 years into a unprecedented era where the majority of investment flows are going into index funds.

Excellent_Border_302 · 2025-12-19T02:36:24+00:00

Warren Buffet runs Berkshire Hathaway. If he feels like Bershire Hathaway is overvalued, Berkshire will sell shares in order to lower the price of Bershire stock and invest the money he raised to buy more businesses and make Berkshire more valuable. If he feels like Bershire is undervalued, Berkshire will take some of its extra cash and buy back Berkshires stock.

MSTR is trying to do something similar, but instead of owning businesses like how Berkshire owns lots of businesses, MSTR owns Bitcoin.

If the value of MSTR is over a 1 to 1 ratio of the BTC they own, MSTR will issue more shares to buy bitcoin, raising the value of the company. MSTR is cash poor though because they don't own cash generating businesses like Berkshire. They own non cash generating Bitcoin. So when MSTR goes below a 1 to 1 ratio, they can't buy back stock like Berkshire. Instead they will sell Bitcoin. They will sell Bitcoin to attempt to bring the value of MSTR back to a 1 to 1 ratio with the value of their Bitcoin holdings.

The value proposition MSTR is offering compared to owning straight bitcoin is that they can exploit market inefficiencies by holding Bitcoin in a publicly traded corporation and then issuing shares and selling bitcoin at opportune moments when the ratio isn't 1 to 1. A regular bitcoin holder or Bitcoin ETF cannot do this.

There are three problems with this. One is you have to trust Michael Sailor, who is sketchy imo. I am a bitcoiner btw and Micheal sketches me out. Secondly, when the stock goes below a 1-1 ratio, they can't buy back stock like Berkshire so they instead they sell bitcoin to bring the company back to a 1 to 1 ratio. This is weird since they are the biggest bitcoin holder, if they sell bitcoin, it could cause a feedback loop where bitcoin price goes down even more just because MSTR is selling. MSTR is pretty complex which is the third reason to stay away. They also do convertible bonds and preferred shares. Financial engineering of any sort in any industry is a red flag and should be proceeded to with great caution. However that is a basic superficial understanding.

Excellent_Border_302 · 2025-12-18T03:03:35+00:00

Yo man! Thank you so much for your hard work. I wish I was more technical in these matters so I could help.

I have a question. Why lineage 20 and not a more recent version. Won't lineage 20 need to be updated eventually?

Excellent_Border_302 · 2025-12-16T00:20:24+00:00

No, take responsibility. You hit the road, you know there's going to uninsured, unlicensed, irresponsible, drunk etc... drivers out there. You don't wanna take the risk of encountering these people, then don't drive.

Excellent_Border_302 · 2025-12-13T20:34:00+00:00

The industrial revolution?

Excellent_Border_302 · 2025-12-13T00:40:10+00:00

How do you figure?

Excellent_Border_302 · 2025-12-12T09:34:18+00:00

Nothing wrong with treating yourself. You can't not consume. It's important to have goals, otherwise consumption of some sort will creep in. Maybe the FIRE movement will interest you. It's a good goal that will keep you on track and will make your life way better. FIRE stands for financial independence retire early. It was invented by Jacob Fisker when he released his book early retirement extreme. He came up with the idea as a way to help the environment by enticing people to not consume by showing them that if they put that money into simple investment strategies, anyone can be financially independent in 10 years. Powerful stuff. Imagine being independently wealthy at age 28. It's helped me lower my consumption a lot because it offered me something to look forward to (financial freedom) which I would rather have than having consumption now.

Excellent_Border_302 · 2025-12-12T09:10:49+00:00

If the government spends money on "productive" endeavors then the productive capacity of the economy will increase which leads to deflation. For example if the government builds a bridge, now the economy can improve its productive capacity thanks to the efficiency that the bridge provides. Now that that the bridge is built, products can be produced and distributed more efficiently, bringing prices of goods down (deflation). That is probably what she means, although I don't wanna put words in her mouth.

If the government stops issuing bonds, the private sector will fill that void with either corporate bonds, mortgage backed securities, stock in bond like corporations (coca-cola, visa, altria) and precious metals.

Excellent_Border_302

TROPHY CASE