Skip to main content


Buffett's STORE CAPITAL Purchase is Like Coke and See's Candy

Ever wondered how Buffett makes his investment decisions? Below is my opinion on how he thinks of his investment in Store Capital (STOR). It's like Coke and See's when he bough them.  Enjoy!

Let me start by saying that the PE ratio of STOR (Store Capital) is at 28x. In contrast the industry average and the S&P average PE is at 21x. That makes STOR on the expensive side(?) and you may be thinking has Buffett abandoned his value investing principle? The answer is no, because STOR's net income has a 67% compounded annual growth rate (CAGR) from 2013 to 2016. At that rate in three years time Buffett's investment would make a lot more sense because even if you just assume a 50% increase in net income, which in 2016 stands at 123 million dollars, for three years, that net income will grow to be 415 million dollars. Buffett purchased his shares as if the company sold for 3.4 billion dollars and that would give Buffett a 12.2% yield on his investment after 3 years. The ke…
Recent posts

The Secret to Warren Buffett's Success in Investing that is in Plain Sight

I am essentially putting 1 and 1 together here. Investors, enjoy!
According to  Daniel Kahneman, a Nobel Prize awardee in Economic Sciences, in his book "Thinking, Fast and Slow," there are two systems working in our brain. He calls it "System 1," and "System 2." System 1 is the quick reacting, quick thinking system. This system is seen in action when we accidentally touch a hot object. Our hand pulls away from whatever hot object our hand got in contact with before us consciously acknowledging that we have indeed touched a hot object.  It works lightning fast. System 2 on the other hand is slow, deliberate. It is the system engaged when we are asked to solve math problems within a short time frame. So asking a friend to subtract 17 starting from 1046, for example, in a time pressured way (have him blurt out the answers, let's say within 1 or 2 seconds) engages his/her System 2.
Now here is where it gets exciting. Systems 1 and 2 compete for space in…

Why Sell Coca-Cola $KO? And will Warren Buffett Agree?

An investment firm (Goldman Sachs) recently said that it is time to sell shares of Coca-Cola shares. Do I agree and would Buffett sell some or all of his shares in Coke? Here is my view:
The PE multiple of $KO stands at 25. That is at the high end of its historical PE ratio. Does that mean that the stock price will go down? Not necessarily. The stock price is on an uptrend and by that alone it can continue to go up because people are making money (the music is still playing). Those who own the stocks are likely to be saying "who cares about the fundamentals, the stock price is going up." But for investors considering buying up Coke shares, it is the fundamentals that we should mind first. Be wary about the growth in earnings. Actually, earnings has slid from the height of 9 billion dollars in 2012 to just above 7 billion in 2016. Sales have also declined (from $48 billion in 2012 to $42 billion in 2016). Declining sales is not good. It could be because of a confluence of ne…