Comments on: Amylin III – Seven months (and much heartbreak) later http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Ashutosh http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1626 Ashutosh Wed, 12 Mar 2008 07:40:53 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1626 Thanks a lot Night. Thanks a lot Night.

]]> By: Night http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1623 Night Tue, 11 Mar 2008 15:53:38 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1623 I cannot immediately remember where we we've gone over this, but I remember a bunch of comments talking about seperating the maintanence cap-ex from the expansion cap-ex. Oh, I think its the wal-mart valuation blog. Find it:) I cannot immediately remember where we we’ve gone over this, but I remember a bunch of comments talking about seperating the maintanence cap-ex from the expansion cap-ex.

Oh, I think its the wal-mart valuation blog. Find it:)

]]> By: Ashutosh Nigam http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1621 Ashutosh Nigam Tue, 11 Mar 2008 08:33:04 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1621 Hi Joe, This is ashutosh from India.Actually I have been reading your posts for one month or so(Sorry for that . I'm from india and I invest in indian markets and as far as I know there is no one in India who has ever taken any such initiative as you are taking,and that's why your posts are really helping me a lot. I will not ask you to analyze any Indian company but Joe I'm seriously having one difficulty in getting the positive cash flow values. For example there is one telecom company which according to your's or buffet's moat philosophy is the best in India. Still since the start of the company in 1993 or so ,it's cash flow is negative and till 2007 it's cash flow was negative (FCF = net operating cash flow - capex) and that's only becasue they are spending more and more in assets acquiring. And this is not the only company with high moat there are lot's of them. Joe I just want to know is there any way to value these companies. I know you might have shared your thoughts about this but it's just that I'm not able to find it,but if not then I think my question is not that bad :-) Thanks, Ashutosh. Hi Joe,

This is ashutosh from India.Actually I have been reading your posts for one month or so(Sorry for that . I’m from india and I invest in indian markets and as far as I know there is no one in India who has ever taken any such initiative as you are taking,and that’s why your posts are really helping me a lot. I will not ask you to analyze any Indian company but Joe I’m seriously having one difficulty in getting the positive cash flow values. For example there is one telecom company which according to your’s or buffet’s moat philosophy is the best in India. Still since the start of the company in 1993 or so ,it’s cash flow is negative and till 2007 it’s cash flow was negative (FCF = net operating cash flow – capex) and that’s only becasue they are spending more and more in assets acquiring. And this is not the only company with high moat there are lot’s of them.

Joe I just want to know is there any way to value these companies. I know you might have shared your thoughts about this but it’s just that I’m not able to find it,but if not then I think my question is not that bad :-)

Thanks,

Ashutosh.

]]> By: Joe Ponzio http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1595 Joe Ponzio Fri, 07 Mar 2008 02:05:22 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1595 <b>Dana:</b> Free Cash Flow and Owner Earnings are two similar, but different, numbers. Check out <a href="http://www.fwallstreet.com/blog/26.htm" title="this post">this post</a>. If it doesn't answer your question, let us know and we'll figure it out together. <b>Jens:</b> Net Issuance of Stock/Debt in parenthesis is a negative amount - the amount of stock they repurchased or the amount of debt the retired (paid off), thereby <i>decreasing</i> or <i>using</i> cash. If the number is positive, the company is issuing stock or assuming debt (thereby <i>increasing</i> their cash flow). <b>Olivier:</b> A business is not self-sufficient if it can't generate enough excess cash <i>from operations of its business</i> to keep itself going. Prime example: <a href="http://www.fwallstreet.com/blog/59.htm" title="look at Alcatel-Lucent">look at Alcatel-Lucent</a> and check out <a href="http://www.fwallstreet.com/blog/88.htm" title="this post about cash flow">this post about cash flow</a>. Rarely does a business turn good or bad in a single quarter, or even one year. Simply look at the current mortgage crisis - a ton of otherwise decent businesses took on too much risk and now they're paying for it. It didn't happen in just the past six months; this overextension accumulated over the past few years. On the flip side, look at Apple. Boring until 2004, when it started generating tons of cash. In 2004 and 2005, the company was generating tons of excess cash that it was able to reinvest to generate even more cash and growth. That trend continued in 2006 and 2007. Had you spent two years watching Apple (2004-2005) and then found a good place to buy in 2006, you would have doubled your money in just two years (or less) because you owned a growing, self-sustaining business at an attractive price. Hope that helps! Dana: Free Cash Flow and Owner Earnings are two similar, but different, numbers. Check out this post. If it doesn’t answer your question, let us know and we’ll figure it out together.

Jens: Net Issuance of Stock/Debt in parenthesis is a negative amount – the amount of stock they repurchased or the amount of debt the retired (paid off), thereby decreasing or using cash. If the number is positive, the company is issuing stock or assuming debt (thereby increasing their cash flow).

Olivier: A business is not self-sufficient if it can’t generate enough excess cash from operations of its business to keep itself going. Prime example: look at Alcatel-Lucent and check out this post about cash flow.

Rarely does a business turn good or bad in a single quarter, or even one year. Simply look at the current mortgage crisis – a ton of otherwise decent businesses took on too much risk and now they’re paying for it. It didn’t happen in just the past six months; this overextension accumulated over the past few years.

On the flip side, look at Apple. Boring until 2004, when it started generating tons of cash. In 2004 and 2005, the company was generating tons of excess cash that it was able to reinvest to generate even more cash and growth. That trend continued in 2006 and 2007. Had you spent two years watching Apple (2004-2005) and then found a good place to buy in 2006, you would have doubled your money in just two years (or less) because you owned a growing, self-sustaining business at an attractive price.

Hope that helps!

]]> By: Olivier Rolland http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1594 Olivier Rolland Thu, 06 Mar 2008 22:37:16 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1594 Hello Joe, How do you see that a business is not self-sufficient ? Is it only when the free cash-flow is going down (during some quarter or year) ? Or are there others indicators in the statements of cash-Flow ? Thanks for your answer. Olivier Hello Joe,

How do you see that a business is not self-sufficient ?

Is it only when the free cash-flow is going down (during some quarter or year) ?

Or are there others indicators in the statements of cash-Flow ?

Thanks for your answer.

Olivier

]]> By: Jens Grudno http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1588 Jens Grudno Thu, 06 Mar 2008 04:34:05 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1588 Hi there. Nice post. I've got an off-topic question about the "net issuance of stock" (and debt) number at morningstar.com. When the number is in brackets, does that mean they bought shares back or issued new ones? Thanks in advance! Jens Hi there. Nice post.

I’ve got an off-topic question about the “net issuance of stock” (and debt) number at morningstar.com. When the number is in brackets, does that mean they bought shares back or issued new ones?

Thanks in advance!

Jens

]]> By: Dana http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1586 Dana Thu, 06 Mar 2008 00:00:18 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1586 Hi, Which is the "best" formula to use for calculating free cash flow? I've read about several. Free cash flow=(operating cash flow)-capital expenditures OR Free cash flow=(net income depreciation)-capital expenditures OR Free cash flow=((net income depreciation)-changes in working capital)-capital expenditures That's THREE different formulas! Which of these should I use when I run my discounted cash flow models? I want the one that will give me the truest calculation of a company's free cash flow. Thanks for the help! -Dana Hi,

Which is the “best” formula to use for calculating free cash flow?

I’ve read about several.

Free cash flow=(operating cash flow)-capital expenditures

OR

Free cash flow=(net income depreciation)-capital expenditures

OR

Free cash flow=((net income depreciation)-changes in working capital)-capital expenditures

That’s THREE different formulas!

Which of these should I use when I run my discounted cash flow models?

I want the one that will give me the truest calculation of a company’s free cash flow.

Thanks for the help!

-Dana

]]> By: Aaron http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1583 Aaron Wed, 05 Mar 2008 10:56:35 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1583 Joe, Excellently put. I am a chemist in a drug development company and new to investing. Obviously, I understand the process and the business but am VERY reluctant to invest in any biotech firm. All of these companies file 15yr patents but by the time 1/20,000 tested "drugs" make it to the market there are only 6-8 yrs left on the patent. Then generics (and in the future maybe the govt) will challenge those patents. At best a 1 billion dollar drug brings in 7-12 billion over its patent life. I'll stick to simpler and more fundamental businesses in my investing style. Joe, Excellently put. I am a chemist in a drug development company and new to investing. Obviously, I understand the process and the business but am VERY reluctant to invest in any biotech firm. All of these companies file 15yr patents but by the time 1/20,000 tested “drugs” make it to the market there are only 6-8 yrs left on the patent. Then generics (and in the future maybe the govt) will challenge those patents. At best a 1 billion dollar drug brings in 7-12 billion over its patent life. I’ll stick to simpler and more fundamental businesses in my investing style.

]]> By: Night http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later/#comment-1582 Night Wed, 05 Mar 2008 08:24:39 +0000 http://www.fwallstreet.com/article/120-amylin-iii-seven-months-and-much-heartbreak-later#comment-1582 Good post, important reminders for me. It should be fundamentally known that if the business isn't self sustaining, you are only speculating. Which is cool, if you know that's what you're doing..and aren't going to be crying when you lose money gambling! Good post, important reminders for me. It should be fundamentally known that if the business isn’t self sustaining, you are only speculating. Which is cool, if you know that’s what you’re doing..and aren’t going to be crying when you lose money gambling!

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