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Seven
What does the last paragraph mean?
Buffett commented that the distinction between the growth and value styles of investing is nonsense.
Value is the only concern for any economic commitment. To calculate your expected return, compute the discounted present value of the flow of all cash from the business between now and judgment day. To do so, you must A) determine the amounts and certainty of cash flows in and out and B) select a discount rate.
Buffett noted that growth can enhance or detract from the calculated value. For example, electric utilities were forced to grow and to invest capital in the 1970s, which lowered their returns.
2018년 9월 26일 오후 3:02
답변 · 4
He is saying that a company which invests a lot of its money into growth (by spending a lot of money on new buildings, infrastructure, staff, research, etc) will also have a changed calculated value as a result. So, the company may be performing very well but the returns for investors may be lower because the company is investing so heavily into growth. Conversely, a company may pay larger returns to investors purely because it is not currently investing in growth (which could be a problem long term, if for example you are holding stocks in a company that is not concerned or interested in growing and improving!)
I hope this makes sense?!
2018년 9월 26일
It is rather simple : if all cash flow is kept by the company, returns are great. If part of the cash flow has to be invested, your return is lower, isn't it ?
2018년 9월 26일
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