• More Buffett ROIC Wisdom: The Good, The Great, & The Gruesome

    In response to a recent Warren Buffett post about his thoughts on ROIC involving a See’s Candy example, a reader suggested I look at the Berkshire 2007 shareholder letter. It makes the same points but also offers some different slants on ROIC that are worth reviewing. I remember reading the 2007 letter when it came…

    read more

  • A Great Columbia Business School Podcast Episode (July 2024) – Some ROIC Mentions

    Here’s a recent interview with Phil Ruvinsky, head of Growth Investing at Blackrock, from a recent Columbia Business School podcast episode hosted by Michael Mouboussin. It touches on some of the topics covered in the last post on ROIC including: This podcast has some exceptional guests so it’s worth checking out other episodes.

    read more

  • Warren Buffett ROIC Wisdom

    I really like this two-minute video from the 2021 Berkshire Annual Meeting. It’s Buffett’s response to a question from the audience about tech companies and return on invested capital. He covers a lot of conceptual ground in only a few minutes, giving a whirlwind tour of how to think about ROIC. To make this a…

    read more

  • Getting An Edge With Customer Based Valuation

    In several posts, I have discussed companies that invest in growth mostly through intangible investment through the income statement (e.g., S&M, G&A, R&D) rather than capital expenditures, and I have highlighted how these investments are incorrectly categorized as expenses under GAAP. If adjustments for this income statement investment are not made, ROIC numbers can be…

    read more

  • Bath & Body Works (BBWI): Surprisingly Strong ROIC & Stock Pitch (Sort Of)

    There are lots of things to dislike about retailers, and it’s especially easy to be dismissive of ones selling soap and candles in malls. But Bath & Body Works () capital productivity and track record of growth are probably stronger than you think. The business consistently generates excess returns on capital and has grown (organically)…

    read more

  • ROIC Calculations Related To Operating Leases

    Quick Background On Lease Accounting Anyone who was a financial analyst before 2019 was likely trained to adjust some version of operating income, enterprise value, and leverage ratio calculations for leases. Why? Before that time, lease expenses related to operating leases were simply expensed in the income statement, and there was zero accounting for them…

    read more

  • Squarespace (SQSP): Solid Capital Productivity

    I own Squarespace stock and in many respects, it’s a great case study for lots of the things I have written about calculating and analyzing ROIC. So I’m going to run through it in this post. What’s the bottom line? SQSP has a pretty attractive ROIC profile – here are the numbers (excluding goodwill and…

    read more

  • Breaking Down ROIC For Hubspot Stock

    It would shock you how many people own, short, or just speak with authority about Hubspot stock without really understanding how the business makes money. Or maybe it wouldn’t, but it’s shocking to me. That’s why in my last post I tried to explain the business in a clear and concise way, in the context…

    read more

  • Hubspot (HUBS): How Do They Make Money?

    As discussed in Winning Stock Pitches: 8 Tips, if you want to have winning stock pitches, you need to nail the How Do They Make Make Money question. Here is an example of one I put together for Hubspot stock . Yes, for a 5-page stock pitch it would be shorter, but given that I…

    read more

  • Winning Stock Pitches: 8 Tips

    A key part of any successful written stock pitch is conveying in a clear, concise, and commonsense way how the company makes money. Yet, too often people write vague, disjointed, or hard-to-follow descriptions of how the business works. Why? Because it’s easier and faster. However, a solid understanding of the business makes it tangible to…

    read more