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CapEx % < Buffett Portfolio?

 A low CapEx indicates that the business is probably mature and doesn’t require much investment tocontinue to grow. As indicated by Buffett’s portfolio, a low CapEx is favorable.

WC Investment % < Buffett Portfolio?

WC means working capital and this is the amount of additional short-term capital needed to run thebusiness. A low, negative, or decreasing WC indicates that the company is run efficiently. The lower thebetter in most cases, but a company often needs more working capital as revenues grow, because theyare dealing with more assets and liabilities on a day-to-day basis. The second threshold means, that if theWC is not below the average for Buffett’s portfolio, then the investment has a chance to score if theinvestment growth rate is below that of the revenue growth rate.

Free Cash Flow…Lots of cash is great.

Cash is the key to this valuation. They more cash a generates, the better. Most companies reinvests cashin their businesses in an effort to generate even more cash in the future. Invest a dollar today and get twodollars tomorrow.

Importance:

The overall importance of value is broken down into two main areas.1. Consistency: 50% of the score relates to the consistency of the individual financial operations of thecompany.2. Cash Flow: 50% of the score comes directly from the financial results that affect cash flow: capitalexpenditures, working capital, depreciation & amortization, and free cash flow.

Valuation Analysis: ScoreThe higher the better. A company gets points for exceeding the score of his current holdings.

Qualitative Analysis: Other Questions an Investor Must Ask

1) Is the business simple and understandable?3) Does the business have favorable long term prospects?2) Does the business have a consistent operating history?4) Is management rational?5) Is management candid with its shareholders?

 A good investor must do their homework before making any investment.