Warren Buffett

random walk:  

AI prompt:  

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Because of Louis Bachelier's "random walk theory" of price movements of stocks in a stock-market--in more efficient markets "prices are random" (similar to the unpredictable movements of a particle undergoing Brownian motion / random motion in a fluid), price changes are random (stochastic) and independent of each other--it means that if you "buy-and-sell", in the short-term, and keep doing this, you will lose money in the long-term (you can't make money short-term "trading", in the long-run) ; but if you buy-and-hold, in the long-term you can win in "random walk" prices stock-markets. Bachelier: embrace uncertainty (with mathematical probability). ...Bachelier's phrase "The mathematical expectation of the speculator is zero" is a central concept in financial theory, in markets. It means that, mathematically, in the long-run, a speculator (short-term trader) cannot expect to make a profit ; and long-term traders can, mathematically, expect to make a profit (growing market, dividends, "retained earnings" (compounding)).

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Warren Buffett likes to say that the first rule of investing is “Don’t lose money,” and the second rule is, “Never forget the first rule.”

Avoiding loss [because of randomness, short-term] should be the primary goal of every investor. This does not mean that investors should never incur the risk of any loss at all. Rather “don’t lose money” means that over several years an investment portfolio should not be exposed to appreciable loss of principal.

It can be hard to concentrate on potential losses while others are greedily reaching for gains and your broker is on the phone offering shares in the latest “hot” initial public offering. Yet the avoidance of loss is the surest way to ensure a profitable outcome.

snowballing: the key is how big of a hill (time). AI prompt: "the snowball effect in investing. the hill is time. the longer the hill, means more exponential compounding. yes? explain... "

Buffett nugget: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

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

youtu.be/ywCFac5Gch0

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 overstated by debt:  simplywall.st/stocks/us/telecom/nyse-vz/verizon-communications/news/should-we-be-delighted-with-verizon-communications-incs-nyse/amp

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.

*  wealthyeducation.com/net-profit-margin-ratio/

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caveat: But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

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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

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

• Why Growth Capital Investors Prefer Lower Capex Businesses: [Why growth capital investors prefer lower capex businesses