Can Turtles Fly?

People who are lazy, like me, and rely on earnings numbers (such P/E ratios or EPS growth,) need to be always mindful that earnings may not accrue to the shareholder in the long run. This occurs when a company earns money (i.e. is highly profitable) but the money is squandered away in some manner. Sometimes, it is not the fault of management per se (i.e. not entirely bad capital allocation); it can simply be the nature of the industry. One of the most common ways this can occur is if the profits need to be recycled into the business just to keep the business running. What really matters for the long-term investor is something more along the lines of "owner earnings" or "free cash flow." Investors who lean more towards value investing tend to rely more on FCF (free cash flow) than on earnings. A good example of this is fund manager, Bruce Berkowitz, who appears to rely almost solely on FCF and rarely talks about EPS. Like most on the Street, I primarily rely o...

The only investment opportunity I have been researching lately is Mega Brands (TSX: MB). I'm still not clear on the merits of the company but am paying close attention to it. I never heard of Chapter 15 bankruptcy but apparently Mega Brands is placing some of its units into chapter 15. The Globe and Mail reports the following : Toymaker Mega Brands Inc. and nine affiliate units have filed for Chapter 15 proceedings in a Delaware court. The filing is a precautionary measure taken by non-U.S. companies that want to pre-empt creditors from filing lawsuits or tying up U.S. assets. The move is part of the financially troubled Montreal-based company's recapitalization plan aimed at slashing almost $300-million of debt. Also part of the previously announced restructuring is a plan to raise about $100-million through an equity issue and $121-million in a private placement. ... Mega Brands said in a press release Friday that – so far – holders representing 72 per cent of the...

One of the annoying things about continuously researching investments is that you may spend a lot of time on research yet end up with nothing. For me, such a scenario (lots of research but neither a buy nor a sell in the end) is one of the most depressing things about investing. Small investors like me—I suspect this applies to majority of the readers—don't do this as a full-time job so any "wasted" time seems like a mistake. Unlike professionals, I don't get paid to spend hours searching for information or thinking about industries; a hundread hours spent on research with no final investment is always a disapointment. Sometimes, though, what seems like a fruitless pursuit can turn out to be a potential investment years down the road. Such is the case with Mega Brands (TSX: MB). I can't remember if I mentioned this stock on this blog before but I have had it on my watchlist for a while now. Mega Brands is one of the major toy companies in North America. It is ...