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April 24, 2018

RSS Aswath Damodaran’s Musings on Markets

  • Alphabet Soup: Google is Alpha, but where are the Bets? April 19, 2018
    In my last two posts, I looked first at the turn in the market against the FANG stocks, largely precipitated by the Facebook user data fiasco and then at the effect of the blowback on Facebook's value. I concluded that notwithstanding the likely negative consequences for the company, which include more muted revenue growth, higher […]
  • Netflix: The Future of Entertainment or House of Cards? April 16, 2018
    For better or worse, Netflix has changed not just the entertainment business, but also the way that we (the audience) watch television. In the process, it has also enriched its investors, as its market capitalization climbed to $139 billion in March 2018 and even after the market correction for the FANG stocks, its value is […]
  • The Facebook Feeding Frenzy: Time for a Pause! April 10, 2018
    In my last post, I noted that the FANG stocks have been in the spotlight, as tech has taken a beating in the market, but it is Facebook that is at the center of the storm. It was the news story on Cambridge Analytica's misuse of Facebook user data,  in mid-March of 2018, that started […]
  • Come easy, go easy: The Tech Takedown! April 7, 2018
    If there is one thing that I have learned about markets over the years, it is that they have a way of leveling egos and cutting companies and investors down to size. The last three weeks have been humbling ones for tech companies, especially the big four (Facebook, Amazon, Netflix and Alphabet or FANG) which […]
  • Spotify Loose Ends: Pricing, User Value and Big Data! March 23, 2018
    In my last post, I valued Spotify, using information from its prospectus, and promised to come back to cover three loose ends: (1) a pricing of the company to contrast with my intrinsic valuation, (2) a valuation of a Spotify subscriber and, by extension, a subscriber-based valuation of the company, and (3) the value of […]
  • Stream On: An IPO Valuation of Spotify! March 17, 2018
    In the last few weeks, we have seen two high profile unicorns file for initial public offerings. The first out of the gate was Dropbox, a storage solution for a world where gigabyte files are the rule rather than the exception, with a filing on February 23. Following close after, on February 28, Spotify, positioning […]
  • Damodaran Online: There is an App for that! March 5, 2018
    My posts over the last two months have been heavy, dealing first with my data update from January 2018, and with the market and its volatility in the last few weeks. I felt like taking a break and talking about something lighter and more personal, and giving you an update on my teaching, writing and […]
  • Interest Rates and Stock Prices: It's Complicated! March 2, 2018
    Jerome Powell, the new Fed Chair, was on Capitol Hill on February 27, and his testimony was, for the most part, predictable and uncontroversial. He told Congress that he believed that the economy had strengthened over the course of the last year and that the Fed would continue on its path of "raising rates". Analysts […]
  • Testing Times: Market Turmoil and Investment Serenity February 10, 2018
    The last week has been a roller coaster ride, though more down than up, and investors have done what they always do during market crises. The fear factor rises, some investors sell and head for the safer pastures, some are paralyzed not knowing what to do, and some double down as contrarians, buying into the […]

RSS Dr David Kass commentary

  • The 10-Year Treasury Note April 23, 2018
    I am quoted in the Washington Post on the 10-Year Treasury Note. “The 10-year is potential competition for stocks,” said David Kass, a professor of finance at the University of Maryland.   “The 10-year is very visible,” Kass said. ”Financial markets tend to focus on the 10-year rate as a form of long-term interest rates.”  […]
  • Stock Buybacks April 15, 2018
    A very interesting article in today’s Washington Post discusses the issue of stock buybacks by corporations. Stock buybacks along with cash dividends enable companies to return capital to shareholders.  Stock buybacks are a tax efficient means of doing so.  Whereas cash dividends are taxable to shareholders, stock buybacks are not (unless shares are sold with a […]
  • CNBC’S “WARREN BUFFETT: INVESTOR, TEACHER, ICON” WILL PREMIERE ON 5/4/18 AT 10PM ET/PT April 13, 2018
    CNBC’S “WARREN BUFFETT: INVESTOR, TEACHER, ICON”  This CNBC original documentary takes viewers inside the story of Warren Buffett’s extraordinary success.  With a blend of wisdom and common sense, Buffett is more than just one of the most successful investors in American history.  He’s also a teacher who has had a tremendous influence on people around […]
  • Kiplinger’s: Should You Invest Like Buffett? April 13, 2018
    I am quoted in the May 2018 issue of Kiplinger’s Personal Finance – “What Would Warren Do?” “Still, at its current price, Teva would not be the bargain for you that it was for Buffett. Teva’s average price was roughly $14.50 a share during the fourth quarter, says David Kass, University of Maryland finance professor […]
  • Berkshire Offered Its 30.8% Stake in USG to Knauf at $42 per Share March 26, 2018
    Berkshire Hathaway offered to sell its many year 30.8% stake in USG to privately held Knauf for $42 per share, representing a 25% premium over its closing price of $33.51 on March 23. At Berkshire Hathaway’s 2017 annual meeting, Warren Buffett said:  “Berkshire has held equity in USG through two bankruptcies: asbestos and too much […]
  • Highlights of Warren Buffett Interview on CNBC – February 26, 2018 March 4, 2018
    Warren Buffett was interviewed on CNBC on February 26, 2018 from 6:00 a.m. – 9:00 a.m ET., primarily to discuss his annual Letter to Shareholders that was released on February 24. The highlights of this interview were: (1) Berkshire Hathaway’s net worth increased by $65.3 billion in 2017, partially as a result of a $29 […]
  • BNN TV (Business News Network – Canada) Interview on Warren Buffett’s Letter To Shareholders February 26, 2018
    I was interviewed on BNN TV (Business News Network – Canada) on February 26, 2018 at 8:40 a.m. ET on Warren Buffett’s Letter To Shareholders. Highlights of my interview: (1) Warren Buffett has not made a major purchase recently because stocks are near all-time highs and he would have to pay a 25% premium over […]
  • 12 Highlights of Warren Buffett’s Letter to Shareholders February 24, 2018
    Berkshire Hathaway released Warren Buffett’s 2017 Letter to Shareholders at 8:00 a.m. today. The highlights were: (1) Berkshire’s $65 billion gain in net worth or book value in 2017 resulted from a $36 billion gain from operations and a $29 billion gain from the cut in corporate income taxes in December.  As a result, Berkshire’s […]
  • Warren Buffett Is Giant Trader of U.S. Treasury Bills February 23, 2018
    I am quoted in a Wall Street Journal article: “Playing With $100 Billion, Warren Buffett Is Giant Trader of U.S. Treasury Bills”. “He’s aware that [Berkshire’s cash] is not earning a high rate of return for shareholders,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a […]

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how warren buffett measures profit performance

Measuring profit performance

November 16, 2014

In his 1977 letter to Berkshire Hathaway shareholders, Warren Buffett said that “most companies define ‘record’ earnings as a new high in earnings per share”. This measure is not appropriate in Mr Buffett’s views. “Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining,

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