The Passive Investing 10% Return Myth

Active investing is dead. Well, at least if you read the headlines of most financial news sites. Armed with data to back that the market returns 10% per year over the long-term, investing in a low-cost S&P index certainly seems like a no-brainer.

In fact, according to CNBC, 80% of the stock market is on "auto-pilot", i.e. using either passive management or algorithmic investing. The "buy everything" strategy can be seen everywhere and is pitched to naive investors as a safe way to compound money.

Peabody Energy - Extremely Cheap At The Current Valuation

After a decline in share price of around 70% this year, Peabody Energy is trading as cheaply as if it were on the verge of bankruptcy. Investors will be rewarded greatly by buying into Peabody, as the depressed share price will allow an incredible return of capital to shareholders. The company is nowhere near insolvency, so Peabody is a strong buy on the basis of discount to fair value.

The 3 Sources of Returns for Warren Buffett's Original Partnership

I was recently reading through Buffett's Partnership Letters (which can be found here) and stumbled upon something that he mentioned numerous times that I've never seen mentioned anywhere else before. Buffett classified his investments into three categories that he believed would have various correlations with the market. He believed that by splitting his capital up into general issues, work-outs, and control situations, he could better protect his downside in order to out-perform the Dow Jones long term.

The Issue with EBITDA: A Case Study into Valeant Pharmaceuticals

EBITDA was created in the 1980s during the LBO boom. At the time, EBITDA was a somewhat relevant metric to acquirers who used significant leverage in purchasing a business. This is because the company's debt would be refinanced at acquisition, so the current interest payments could be ignored. Taxes were irrelevant as almost all earnings were used for interest payments. Finally, as corporate raiders had no intention of reinvesting capital back into the business, maintenance CAPEX, and by proxy, depreciation and amortization, became irrelevant as well.

After the 1980s, Wall Street stuck with its obsession with EBITDA because it produces a significantly higher number than plain earnings. Who wants to buy a company at a P/E of 44? Very few. What if the same company has an EV/EBITDA of 8? Strong buy!

Hello, World!

The African spurred tortoise (Centrochelys sulcata), also called the sulcata tortoise, is a species of tortoise, which inhabits the southern edge of the Sahara desert, in Africa. It is the third-largest species of tortoise in the world, the largest species of mainland tortoise, and the only extant species in the genus Centrochelys.