The Manual of Ideas by John Mihaljevic

- Your Highlight at location 193-194 | Added on Monday, 19 October 2015 07:26:16

When small investors commit capital to megacaps such as Exxon Mobil or Apple, they willingly
surrender a key structural advantage: the ability to invest in small companies.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 212-213 | Added on Monday, 19 October 2015 07:30:03

Buying businesses cheaply has not generated his long-term returns—it has merely accentuated
them.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 237-238 | Added on Wednesday, 21 October 2015 07:05:30

Without realizing it, we are committing the fallacy of considering the scale of our portfolio ahead of
the scale of potential investments.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 265-266 | Added on Wednesday, 21 October 2015 07:19:25

it seems that many investors ’ tolerance for losses is exaggerated by the subconscious reassurance
that their investment amount is limited and they cannot be forced to commit more capital

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 268-268 | Added on Wednesday, 21 October 2015 07:20:10

If other investors end up funding the losses of

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 268-268 | Added on Wednesday, 21 October 2015 07:20:26

dilute our interest or

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 269-269 | Added on Wednesday, 21 October 2015 07:20:38

if they lend money to the company, increase its interest expense

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 270-271 | Added on Wednesday, 21 October 2015 07:20:53

If the company is able to fund losses with the liquidity available on the balance sheet, our
percentage stake will not get diluted, but book value per share will decline. As

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 278-279 | Added on Wednesday, 21 October 2015 07:22:48

Successful long-term investors believe their return will come from the investee company return on
equity rather than from sales of stock. This

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 284-285 | Added on Wednesday, 21 October 2015 07:24:43

learned that self-restraint was crucial, as buying an overvalued company in expectation of positive
news could backfire.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 307-309 | Added on Wednesday, 21 October 2015 07:29:59

the top management of a large and growing corporation becomes progressively more removed from
the multiplying touch points with customers, suppliers, and partners. This reduces management
effectiveness, eventually causing scale to become a disadvantage and providing competitors with an
opportunity to beat the incumbent.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 324-327 | Added on Wednesday, 21 October 2015 07:35:40

If the stock market shut down tomorrow, how would we estimate the value of the stock we own?
We might try to figure out the financial profile of the business in which we are part owners. How
much cash could this business pay out this year, and is this amount more likely to increase or
decrease over time? Somewhat counter-intuitively, the recipe for evaluating a business purchase is
the same whether the stock market is open or closed.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 478-481 | Added on Monday, 26 October 2015 21:11:35

The truism that over the long term an investor in a business will earn a return closely matching the
return on capital of the business is only partly true. If the business dividends out all free cash flow, a
long-term shareholder will earn a return equal to the free cash flow yield implied in the original
purchase price. The return on capital earned by the business is irrelevant when the payout ratio is
100 percent. As the payout ratio declines, the economics of the business becomes increasingly
important.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 527-528 | Added on Wednesday, 28 October 2015 07:05:39

Investors suffer mightily when they overestimate the duration of the abnormal earning period of a
business.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 582-583 | Added on Wednesday, 28 October 2015 07:27:08

Misery loves company, so it makes sense that rewards may await those willing to be miserable in
solitude.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 705-706 | Added on Monday, 2 November 2015 18:17:18

Share repurchases tend to be particularly accretive in the case of companies generating cash from
operations while trading below tangible book value.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 713-716 | Added on Monday, 2 November 2015 18:21:33

If a business trades above fair value, repurchases will destroy value even as they create growth in
per-share book value. In such a scenario, the downside would increase even as the ratio of price to
tangible book value decreases. Ultimately, repurchases create value only if they occur at prices
below intrinsic value. That said, if we correctly judge that a company trading below book value is
undervalued, then the book-value-per-share accretion dynamic will force revaluation faster than
might be the case in the absence of repurchases.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 805-807 | Added on Tuesday, 3 November 2015 17:13:13

When something other than capital employed drives the profits of a business, that something can
change quite easily unless the business has a sustainable moat. Businesses with low capital intensity
may be more likely to exhibit winner-take-all dynamics, as capital is not a barrier to scale.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 1824-1827 | Added on Monday, 7 December 2015 07:15:17

For Buffett, the goal first and foremost is not to invest in great managements but in great
businesses. Were this not so, he might never have uttered these famous words: “When a
management with a reputation for brilliance tackles 117 a business with a reputation for bad
economics, it is the reputation of the business that remains intact.” Pat Dorsey, president of Sanibel
Captiva Investment Advisers, reminds us of another Buffett quote: “Good jockeys will do well on
good horses, but not on broken-down nags.”

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 1835-1835 | Added on Monday, 7 December 2015 07:18:22

Chief executives can distinguish themselves in two major ways: business value creation and smart
capital allocation.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 2440-2441 | Added on Wednesday, 16 December 2015 07:25:12

The problem is not only that all investors make mistakes but also that our ability to stick with an
investment is diminished if we have not done the research to give ourselves a certain level of
conviction.

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The Manual of Ideas by John Mihaljevic

- Your Highlight at location 2443-2444 | Added on Wednesday, 16 December 2015 07:25:36

Without conviction in the soundness of the original investment decision, we may well end up selling
at the most inopportune moment.