15 June 2021

Warren Buffett

Gross Profit Margin 20% is commodity.  GPM 40% has durable competitive advantage.

Buffett’s admonition that the stock market is a device used to transfer wealth from the impatient to patient ones.

"One of the most persuasive tests of high-quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company’s quality rating.” - Ben Graham, The Intelligent Investor

X0M : 3.80 / 60.21 = 0.06311 (YOC)

ROE = Net Profit (from continuing operations) ÷ Shareholders' Equity
ROE takes into account the amount of debt a company has on its balance sheet. The higher the debt levels, the higher the ROE will be, as long as the company is still profitable.
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for OXY is:
19% = US$5.4b ÷ US$29b (Based on the trailing twelve months to September 2023).
The 'return' is the yearly Profit. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.19.


In stock investing, a company with low capital intensity is one that doesn't need a lot of money upfront to generate sales. They typically have lower levels of fixed assets, like factories and equipment, compared to their revenue. This is opposite to capital-intensive businesses, which require significant investment in property, plant, and equipment (PP&E) to function.

Here's a breakdown of why low capital intensity can be attractive for investors:

  • Higher returns on invested capital: Since less money is tied up in assets, a low capital intensity company can potentially earn a higher return on the capital they do have.
  • Faster growth: Because they don't need constant big investments in equipment, low capital intensity companies can potentially reinvest more profits back into the business, which can fuel faster growth.
  • Lower risk: They are generally less vulnerable to economic downturns. During recessions, demand for goods and services often falls, making it harder for capital-intensive businesses to justify the high cost of maintaining their assets.

Here are some examples of industries with low capital intensity:

  • Technology companies (especially software)
  • Retail (especially online retailers)
  • Professional services

Here are some resources you can refer to for further reading:

  • Investopedia on Capital Intensity: [Investopedia capital intensive ON investopedia.com]
  • Why Growth Capital Investors Prefer Lower Capex Businesses: [Why growth capital investors prefer lower capex businesses ON Concept Financial Services Group [invalid URL removed].au]

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