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Bruce Berkowitz's Analytical Framework


Mungerism's picture

By Mungerism - Posted on 18 January 2009

1. Study the company's ability to generate free cash flow.
2. Think about ways in which we could “kill” the company – i.e., what kinds of mistakes or misfortunes could impair our investment. In the case of ACF, we believe that in some of those scenarios – such as in run-off mode – we could get significantly higher value.
3. The tangible book value should start to approximate the liquidation value.
4. Analyze what is not included in the tangible value, such as the time value of money (e.g., the present value of future insurance premiums) and whether the tangible values are really tangible (e.g., whether their fixed assets are fairly valued on their balance sheet).

Read more:
http://www.advisorperspectives.com/newsletters09/Bruce_Berkowitz-Prices_...

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