RETURN ON CAPITAL - STOCK MARKET INVESTING SECRET EXPLAINED

Return on capital - hedge fund manager Peter Barklin explains why it is so important when it comes to investing in the stock market.
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I am also learning a lot by interning with my mentors: dr. Per Jenster and Peter Barklin at the Niche Masters fund.
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[@ALfromNY]

Please keep the videos coming. I have my notebook out and can't get enough of the knowledge being shared. Thanks again Doc

[@socalsilver6397]

Best channel on KZbin 👌🏼

[@Value-Investing]

Thanks!

[@user-ql3ws5uz1d]

I could listen to you guys talk about investing all day

[@WorldReserveCurrency]

wow Peter Barklin provided great insights.

[@decebalusflorei6164]

8:57 "We are buying great businesses that generate cash-flow from shareholders.............for the management" (Sven Carlin, 11.12.2018 ) . Great and informative video as usual. I really love the interviews. :)

[@anthonyminniti17]

Love it, what a great interview thank you so much

[@tubarao1143]

This is an amazing video!

[@simong9163]

Thanks Sven and Peter - great video and I love the conversational format with the visuals on top. A question about the best definition of "capital" to use: there are multiple metrics available, mainly ROIC (invested capital), ROCE (capital employed) an ROE (equity). Peter mentions a lot about the book value, which would be return on equity, but for firms with high debt, equity could even be negative. So I assume it's better to look at ROIC or ROCE - which would you look at most often? I think they are similar - capital employed is usually [total assets - long term liabilities] and invested capital is usually [equity + total debt].. which often come out quite similar and the difference can be the excess cash, for example. Thanks!

[@WalksandAll]

Remember the rule of 72 or the rule of 69.3. When working out how long it takes to double your money. If a share makes 10% a year 72 ÷ compound annual interest rate = amount of years rro double. There are 3 said numbers to divide by depending on compund annual interest etc just google it and familiarise yourself with it. Thanks again to Sven and Co plus peter Lynch where I learnt this from

[@hodoprime]

Peter is a great teacher.

[@Value-Investing]

Yes he is!

[@gregkinsey3697]

Just bought your book can't wait to read it!

[@Value-Investing]

Thanks!

[@pepesantas]

Nice one, gentlemen. Thank you both! 🙂 Looking forward to your own analysis on Dechra, Sven. 😉

[@Value-Investing]

:-)

[@zukov85]

Great interview Sven......and as always, excellent use of graphs and charts to supplement the audio. Do the concepts & methods described in your book (to find great companies) differ to Peters? Seems like he uses slightly different parameters.

[@Value-Investing]

It is an amazing addition to the book and something to focus more on in the next edition. However, I touch on all, ROC, business quality, moats etc.

[@Mehrdad100]

Thank you, Really nice conversation. Definitely useful to discuss this ROIC. Would be also nice and educational if a few video like this were available to discuss other Key financial statement metrics. After all , what is Value investing without understanding small (but crucial) differences between these metrics? Gambling?

[@Value-Investing]

thanks!

[@harrisonL772]

Invaluable! Thanks Sven

[@Value-Investing]

Thanks!

[@BohdieLotion]

Nice video. I myself find ROC a bit tricky. Actually it seems to be a simple metric, however, if you are not careful you might burn your fingers. ROC has to be sustainable, otherwise it means nothing. Companies may gain high ROC because of trends, general upcurrent in debt cycles and so on, which then might implode in the next cycle or if new consumer trends appear. Also industries with high ROC attract much more competition. So basically, the crucial part here is (as always) the moat! Without moat, ROC means nothing. Please keep this in mind, fellow investors. This metric is very powerful but should be used together with deep enterprise analysis of individual stocks. Buffet/Munger stuff, however, not my territory... But I also really agree with him saying that avoiding the losers already is a big leap in the right direction. That's what bothers me most with normal ETF's from an indexers point of view, because they also contain negative-margin/ROC-high-debt companies you actually really should avoid. Nice interviews Sven, keep it going. BTW I would have an a bit more personal question about your business. Could I please send you a private mail for this?

[@Value-Investing]

yes, investwithsven"gmail.com

[@watchdog3640]

Another very valuable interview. Thanks to the both of you. I have a question however (I might have missed something in preceding videos). I understand the concept of ROC roughly but what is the precise definition of ROC? How can it be calculated in a specific case?

[@Value-Investing]

can be calculated for any company but you have to always adjust something for the specifics. As for the formula, there is google:-)

[@watchdog3640]

@@Value-Investing I checked Investopedia, a very good source for the technical stuff.

[@dougharitopulos7694]

Very good

[@round12tko]

Share buybacks manipulate the stock price and return on capital

[@mistery2628]

So Amazon does not have a competitive advantage, because it did not have a consistent high ROIC ?

[@csaintaz3020]

Hey Sven, Great videos. Just curious how Dechra Pharma fits into value investing approach. Price to book is around 438. Trailing PE 58. Is there something going forward that makes this company look good?

[@Value-Investing]

it is a specialty niche company that is making money:-) with a moat:-) However, we have to do an thorough analysis.

[@dealman6237]

very useful

[@Value-Investing]

thanks!

[@SanktGallus]

I Like His dänisch akcent ... 🎶. Smörebröd rampampam Pam.

[@TheLazyGamer42]

At 10:40 I am confused. Could anyone please help? How is the profit of a company with P/B of 10 can reinvest at P/B of 1?

[@Value-Investing]

the company doesn't reinvest in the stock, it reinvest in the business at cost, at book value, not at stock price

[@parayamaska]

Hey Sven, what do you think of the Canadian streaming company Metalla Royalty (MTA)? Their balance sheet has been improving from 2017 to 2018 and I would purchase it as a stock hedge.

[@Value-Investing]

I am not familiar with the company:-(

[@andreventinhas5507]

Hello my friend...I am thinking to start my own investment. But in Portugal I think that we have to pay to much in comissions and price of execution in the plataforms. Can you help me to find a good platform to invest?

[@Value-Investing]

find international brokers, or use the dutch one that we use on our platform that should be the cheapest in Europe, degiro.pt

[@greenghost6691]

Only 14 minutes? We're gonna need about 14 more hours. :)

[@TBander88]

Hi Svern, I wonder if its possible to have a company reporting high ROC but minimal revenue and profit growth? If so, how can we reconcile between them? Saw a company having this characteristic, and I'm not sure how to interpret this conflicting data. Thank you!

[@Value-Investing]

Sorry, I can't discuss out of context :-(

[@BorisGligorijevic]

Of course it is and it happens quite often. This is e.g. the wd-40 company. Strong ROC, but no room to grow anymore. These companies usually pay high dividends and do buybacks but that is all the return you get long-term without growth. What you need is an optimal sizing of ROC and growth, that is a winning formula for long-term compounders. Of course, the moat to keep that ROC high is needed as well.

[@bighands69]

@@BorisGligorijevic I would not go so far as to say WD-40 has no room to grow. The normally have used cash on hand to keep their debts under control and still maintain cash.

[@bighands69]

Imagine you are a company that has a budget of 1 million per year to spend on new equipment and for 4 years straight the business goes out and buys new equipment that just sits in a corner collecting dust and the cleaning bill for them is 50,000 per year. I think we all would understand that to be very bad business.

[@Value-Investing]

thanks for commenting

[@jerzyfilipek4100]

GE anyone?;)