In other words, a higher earnings yield is better than a lower one.” The Math of Magic Formula Investing One way to do this is to purchase a business that earns more relative to the price you are paying rather than less. “Paying a bargain price when you purchase a share in a business is a good thing.
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In this way, you can buy the best companies at a low price. There are times to exploit Mr Market’s unstable emotions that is, to buy from him when he is depressed about stocks. He opined that “Mr Market” is irrational in the short term, but in the long run, he actually values stocks close to their true value. Greenblatt mentioned Benjamin Graham’s concept of “Mr Market”. In other words, businesses that earn a high return on capital are better than businesses that earn a low return on capital.” #2 Buy cheap stocks at bargain prices, with High Earning Yields One way to do this is to purchase a business that can invest its own money at high rates of return rather than purchasing a business that can only invest at lower ones.
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“Buying a share of a good business is better than buying a share of a bad business. Here’s an insightful quote from the book: Hence, it makes sense to buy stocks of companies that can make the most profit with the least capital.
#MAGIC CALCULATOR FOR STOCKS HOW TO#
Business owners must know how to deploy their funds effectively. The primary purpose of businesses and companies is to maximise the returns of their working capital. Let’s see how these work: #1 – Buy Good Companies: High return on Capital
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Many years ago on a friend's father asked me to create a First in First Out FIFO calculator for stocks which he held.