The hottest Corporate Finance Substack posts right now

And their main takeaways
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Top Finance Topics

Sounding good or Doing good? A Skeptical Look at ESG

Musings on Markets • 19 implied HN points • 21 Sep 20
💼 Business Corporate Finance Investment Strategies Social Responsibility Market Trends
  1. ESG, which stands for Environmental, Social, and Governance, is a popular business approach, but its actual benefits are unclear. Some argue it makes companies better, while others believe companies that do well just appear more socially responsible.
  2. Measuring social goodness is complicated because different services often give very different scores to the same company. This inconsistency makes it hard to agree on what makes a company 'good' or 'bad.'
  3. Investors should be cautious with ESG investments. Sometimes, focusing on social responsibility might not lead to higher profits. It's important to look at the bigger picture and not just rely on ESG ratings.

January 2019 Data Update 5: Hurdle Rates and Costs of Financing

Musings on Markets • 19 implied HN points • 24 Jan 19
💰 Finance Corporate Finance Investment Analysis Risk management Valuation
  1. Hurdle rates are important because they help companies decide whether to invest in a project. They reflect the risks involved and the expected returns for different funding sources.
  2. Businesses face various types of risks like business, financial leverage, country, and currency risks. Understanding these risks helps in accurately calculating the cost of capital.
  3. It's crucial to maintain consistency in currency analysis, adjusting for inflation and risk, as it affects investment evaluations. Choosing a currency should not change the project's perceived risk or outcome.

Stock-based Employee Compensation: Value and Pricing Effects

Musings on Markets • 19 implied HN points • 13 Feb 14
💰 Finance Financial Analysis Corporate Finance Accounting Valuation
  1. Stock-based compensation is an expense that affects a company's earnings. It should be counted and not ignored because it represents a real cost to the business.
  2. Adjusting financial metrics like profits to remove stock-based compensation can be misleading. It can make a company look more profitable than it really is, especially when comparing with others that don’t do the same.
  3. The way companies handle stock-based compensation can impact their valuation. Analysts need to account for this properly to get an accurate picture of a company's worth.

The Price-Value Feedback Loop: A Look at GME and AMC!

Musings on Markets • 0 implied HN points • 03 Feb 21
💰 Finance Investing Stock Market Valuation Economic Theory Corporate Finance
  1. The stock price and a company's value can be very different. Price is about what buyers are willing to pay, while value is about the company's actual worth based on its profits and risks.
  2. When a company's stock price goes up or down, it can create a feedback loop that affects its overall value. For example, higher stock prices can make it easier for a company to get loans or attract employees.
  3. Issuing new shares when the price is high can bring in cash, but it's a bit of a gamble because it can also lower the stock price if not managed carefully. It's all about finding the right balance.
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Marking Time: A new year, a fresh semester and its class time!

Musings on Markets • 0 implied HN points • 12 Jan 21
🚌 Education Corporate Finance Valuation Investment Strategies Teaching Methods
  1. Teaching is all about having a clear story throughout the course. Each class connects through a central theme that helps students remember what they learned.
  2. Corporate finance is super important because it relates to any decision involving money. Knowing how to run a business means understanding corporate finance.
  3. Investment philosophies show that there isn't just one way to be a successful investor. Different strategies work for different people, and trying to copy famous investors often doesn't lead to the same level of success.

Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)!

Musings on Markets • 0 implied HN points • 09 Jan 21
💰 Finance Data Analysis Market Trends Investment Strategies Corporate Finance Economic Impact
  1. Data is most valuable when it's unique and exclusive. If everyone has access to the same data, it loses its worth.
  2. It's important to look at the big picture with data to avoid tunnel vision. By understanding industry norms, investors can better judge individual stocks.
  3. Data can expose misinformation and challenge common beliefs. Relying on facts rather than opinions helps clarify the truth in financial discussions.

A Viral Market Update XIII: The Strong (FANGAM) get stronger!

Musings on Markets • 0 implied HN points • 20 Aug 20
💰 Finance Market Analysis Investing Equity markets Corporate Finance
  1. The FANGAM stocks (Facebook, Amazon, Netflix, Google, Apple, and Microsoft) have become even more powerful during the market crisis. They've been driving the market recovery and are key to understanding future trends.
  2. While many companies are struggling, the FANGAM stocks are doing well due to their innovative business models and large user bases. They continue to grow and generate substantial profits, unlike older companies that face challenges as they age.
  3. Investors should be cautious with FANGAM stocks, as some may be overvalued despite their growth. It's essential to assess each company's value carefully before making investment decisions.

A Viral Market Update XI: The Flexibility Premium

Musings on Markets • 0 implied HN points • 02 Jul 20
💰 Finance Market Analysis Investment Strategies Corporate Finance Risk management Economic Trends
  1. Flexibility is key for businesses during tough times. Companies that can quickly adapt their operations are often more successful.
  2. Investment, operating, financing, and cash return flexibilities are important factors. Companies that manage these well are more likely to thrive.
  3. However, focusing on flexibility can have trade-offs like shorter business lifecycles and social costs. It's crucial to balance flexibility with long-term stability.

A Viral Market Meltdown V: Back to Basics!

Musings on Markets • 0 implied HN points • 31 Mar 20
💰 Finance Market Analysis Investment strategy Economic Trends Asset Valuation Corporate Finance
  1. The market is experiencing a lot of ups and downs, with some recovery seen recently. However, many global indices are still down significantly compared to earlier this year.
  2. Investors should go back to basic evaluation strategies during this unpredictable time. It's important to assess potential company shakeups and their financial health rather than solely relying on past data.
  3. The survival of companies is at risk, especially those with high debt or poor earnings. The post-crisis market might look very different as new winners and losers emerge.

Data Update 7 for 2020: Debt Delusions and Reality

Musings on Markets • 0 implied HN points • 21 Mar 20
💰 Finance Corporate Finance Debt Management Investment strategy Risk Assessment Market Analysis
  1. Companies with high debt are more likely to fail during tough times. It's important for them to manage their debt levels carefully to survive crises.
  2. Borrowing can seem appealing due to tax benefits, but it carries risks. The real impact of debt on a company's success depends on its ability to generate stable income.
  3. When assessing a company's debt, looking at different calculations is key. Debt measures based on earnings can reveal whether a company can handle its debt payments, even if its overall debt ratio looks good.

Data Update 5: Relative Risk and Hurdle Rates

Musings on Markets • 0 implied HN points • 27 Feb 20
💰 Finance Corporate Finance Risk management Investment Strategies Valuation Methods Market Analysis
  1. You can estimate the risk of different companies even if you don't like using betas. There are other ways to measure risk that might suit you better.
  2. When valuing investments, it’s important to first determine their risk, because that helps set a safe buying price. This means understanding both equity and debt costs.
  3. The cost of capital is calculated by looking at how much companies have to pay for funding, taking into account their mix of debt and equity. This is key for valuing companies correctly.

Data Update 1 for 2020: Setting the table

Musings on Markets • 0 implied HN points • 13 Jan 20
💰 Finance Data Analysis Corporate Finance Risk Assessment Investment Strategies
  1. Accessing raw data for companies is easy now, but choosing the right data sources and how to analyze it is important. It's like picking the best ingredients for a recipe.
  2. Using different types of data, like macro and micro data, helps provide a clearer picture of a company's financial health. Each type of data tells a part of the company's story.
  3. Data can be biased and misused, so it's important to look beyond just numbers. Making decisions based on data should include critical thinking and understanding the context.

The Perils of Investing Idol Worship: The Kraft Heinz Lessons!

Musings on Markets • 0 implied HN points • 27 Feb 19
💰 Finance Investing Market Analysis Corporate Finance Risk management Financial Reporting
  1. Warren Buffett and major investors can make mistakes just like anyone else. Investors shouldn't blindly trust their idols without thinking critically about their decisions.
  2. Stocks are not like bonds; companies aren't required to pay dividends. If a stock's yield seems too good to be true, it might not be sustainable.
  3. Brands can lose their appeal over time. Even famous names can struggle to remain relevant as tastes change and the market evolves.

January 2019 Data Update 8: Dividends and Buybacks - Fact and Fiction

Musings on Markets • 0 implied HN points • 08 Feb 19
💰 Finance Investing Stock Market Economic Policy Corporate Finance Data Analysis
  1. Companies are spending a lot more on stock buybacks compared to dividends. This trend has been growing since the 1980s, with more than 60% of cash returned to shareholders coming from buybacks in recent years.
  2. There's a debate about whether buybacks are good for the economy. Some say they help shareholders while others believe the money should be reinvested in businesses or used to increase wages for workers.
  3. Not all companies use buybacks in the same way. Larger, mature companies tend to buy back more stocks, but many smaller or high-growth companies are still focused on building their businesses instead.

January 2019 Data Update 7: Debt, neither poison nor nectar!

Musings on Markets • 0 implied HN points • 05 Feb 19
💰 Finance Debt Management Corporate Finance Investment strategy Financial Analysis
  1. Debt can be good or bad depending on the company's situation. It's important to know when it's helpful and when it can lead to problems.
  2. The recent US tax reforms made borrowing less attractive for companies. Many still increased their debt, possibly out of habit or uncertainty about future tax changes.
  3. Leases are now treated as debt in accounting, which changes how we view a company's financial health. This change can show companies as more leveraged than before.

Trillion Dollar Toppers: Market Triggers, Value Drivers and Pricing Catalysts!

Musings on Markets • 0 implied HN points • 10 Sep 18
💰 Finance Investing Market Analysis Stock Valuation Corporate Finance Investment Strategies
  1. Market capitalization milestones, like reaching a trillion dollars, don't change a company's fundamentals, but they can affect investor emotions and behavior. These numbers can create buzz and might influence decisions, even if nothing actually changes in the company.
  2. Investors often react differently to market triggers. Some focus on long-term value based on earnings while others rely on technical indicators. Understanding both perspectives can help investors navigate the market more effectively.
  3. The distinction between value drivers and pricing effects is important. Value is based on a company's fundamentals, while pricing can be influenced by market mood. Recognizing this difference can guide investors in making more informed decisions.

Twists and Turns in the Tesla Story : A Boring, Boneheaded Update!

Musings on Markets • 0 implied HN points • 28 Jun 18
💼 Business Investing Corporate Finance Market Analysis Entrepreneurship Leadership
  1. Tesla is a very interesting company because its CEO, Elon Musk, often makes headlines for both good and bad reasons. This creates a lot of excitement and debate among investors about the company's future.
  2. Tesla has faced criticism for poor financial management, including a questionable acquisition of Solar City and taking on a lot of debt. This raises concerns about its long-term financial health.
  3. The future of Tesla depends on achieving aggressive growth targets, improving profit margins, and managing its debt wisely. Investors need to stay cautious about Musk's promises that might not be realistic.

When Recession Hit Hard

Sector 6 | The Newsletter of AIM • 0 implied HN points • 24 Mar 23
💼 Business Economics IT Industry Leadership Corporate Finance Job Market
  1. The Indian IT industry is experiencing rapid changes in leadership. Several CEOs have recently stepped down or been replaced.
  2. Rajesh Gopinathan, CEO of TCS, has left his position, and K Krithivasan is set to take over. This shift reflects broader movements in the industry.
  3. Other companies in the sector are also seeing leadership changes, indicating a period of transition and uncertainty.

January 2018 Data Update 9: Dividends, Stock Buybacks and Cash Holdings

Musings on Markets • 0 implied HN points • 04 Feb 18
💰 Finance Investing Dividends Corporate Finance Stock Buybacks Cash Management
  1. Dividends and cash returns are important for businesses, but many believe they signify failure instead of success. It's better for companies to return cash to shareholders rather than forcing it into poor investments.
  2. In reality, capital markets aren't always accessible, making it risky for companies to pay large dividends. If they overcommit to dividends, they could miss out on great investment opportunities.
  3. Many companies pay dividends out of habit, even when it may not be wise. This can lead to inefficiencies where they prioritize dividends over solid investment strategies.

January 2018 Data Update 8: Debt and Taxes

Musings on Markets • 0 implied HN points • 29 Jan 18
💰 Finance Debt Management Tax policy Capital Structure Corporate Finance Investment Strategies
  1. The U.S. tax code has favored debt financing, giving businesses tax advantages for taking on debt rather than using equity. This has encouraged many companies to load up on debt for growth.
  2. Recent tax reforms have reduced the benefits associated with debt, leading companies to rethink how much debt they carry. This could lower overall borrowing and help stabilize businesses.
  3. As companies adjust to these new tax rules, we may see a trend of firms paying down debt and reconsidering their capital structures, which could lead to less volatility in their financial performance.

January 2018 Data Update 7: Growth and Value

Musings on Markets • 0 implied HN points • 27 Jan 18
💰 Finance Investing Corporate Finance Market Analysis Data Analysis Performance Metrics
  1. Profitability is measured using various profit margins, which help assess how well a company is doing. It’s important to choose the right measure based on what you're analyzing, like gross margin for efficiency or net margin for overall profitability.
  2. Excess returns show how much a company earns above its cost of capital, and most companies struggle to achieve this. Many firms aren't making enough money to cover their investments, highlighting a risk in company performance.
  3. Regional, sector, and size factors influence company profits. For instance, smaller companies often perform worse than larger ones, and certain industries, like technology, can produce high returns while others, like retail, may struggle.

January 2018 Data Update 6: A Cost of Capital Primer

Musings on Markets • 0 implied HN points • 26 Jan 18
💰 Finance Investments Corporate Finance Valuation Risk management Capital Structure
  1. The cost of capital is a critical concept in finance, representing the return an investor requires from a business investment. It's best understood as an opportunity cost, not just the cost of borrowing money.
  2. It's important to use appropriate rates for different risks when making investment decisions, as applying a single cost of capital to varying investments can lead to poor choices.
  3. Estimating the cost of capital involves understanding both equity and debt and considering market values. Having a clear method can help make better financial decisions.

January 2018 Data Update 3: Taxing Questions on Value

Musings on Markets • 0 implied HN points • 12 Jan 18
💰 Finance Tax policy Corporate Finance Economic Impact Investment strategy Market Analysis
  1. The 2017 Tax Reform lowered the corporate tax rate significantly from 35% to 21%, affecting how much companies pay in taxes.
  2. Changes to how foreign income is taxed allow companies to bring money back to the US more easily, which can impact growth and investment.
  3. The tax reform creates winners and losers among sectors, benefiting those with high taxes and physical assets, while hurting those with low taxes and high debt.

January 2018 Data Update 1: Numbers don't lie, or do they?

Musings on Markets • 0 implied HN points • 05 Jan 18
💰 Finance Market Data Investment Analysis Corporate Finance Risk management Financial Metrics
  1. Collecting and analyzing data from a large number of companies helps in gaining a better perspective for making investment decisions. It allows for comparison against industry and geographic averages.
  2. It's important to question common investing rules of thumb and understand whether they still hold true in today’s market. Examining actual data can reveal if these rules are outdated.
  3. Trends and changes in corporate finance can significantly impact investors and the economy. It’s useful to track how companies evolve over time and how that affects various financial metrics.

The Dark Side of Globalization: An Update on Country Risk!

Musings on Markets • 0 implied HN points • 13 Jul 17
💼 Business Globalization Investment Risk Corporate Finance Economic Trends Market Analysis
  1. Globalization affects all investors, even those focused solely on domestic stocks. Large companies often get a big part of their income from international markets, meaning domestic investments can still carry foreign risks.
  2. Central banks have less control over economic growth due to globalization. Their traditional methods to influence interest rates and stimulate economies are being challenged by the interconnectedness of global markets.
  3. Country risk involves various factors, including corruption and legal protections. Investors need to be aware of these risks and adjust their expectations and strategies accordingly.

Apple: The Greatest Cash Machine in History?

Musings on Markets • 0 implied HN points • 09 Feb 17
💼 Business Corporate Finance Valuation Investing Market Analysis Cash Management
  1. Apple has built a huge cash reserve, nearly $250 billion, mostly because it earns more than it distributes to shareholders. This makes it one of the best cash-generating companies ever.
  2. Despite giving back a lot of cash to its investors through dividends and buybacks, Apple's cash balance keeps growing. This shows how strong its business is, even during tougher market conditions.
  3. Investors should adjust their expectations for Apple because it may not come up with big new products as it did in the past. It is now a massive company facing more competition, which can lead to mood swings in its stock price.

January 2017 Data Update 9: Dividends and Buybacks

Musings on Markets • 0 implied HN points • 06 Feb 17
💰 Finance Investing Corporate Finance Dividends Stock Buybacks Market Trends
  1. Companies often decide on dividends based on what cash is left over after making other investments. Ideally, they should focus on their overall financial health first before determining how much to return to shareholders.
  2. Many companies are shifting from paying dividends to doing stock buybacks, meaning they are buying their own shares back instead of distributing cash directly to shareholders. This is becoming common in many markets around the world.
  3. The cash that companies hold can be a sign of either financial prudence or poor management. While having cash can protect a company during tough times, too much cash held back might mean that managers are not returning wealth to shareholders effectively.

January 2017 Data Update 8: The Dark and Light Sides of Debt

Musings on Markets • 0 implied HN points • 01 Feb 17
💰 Finance Corporate Finance Debt Management Investment strategy Risk Assessment Financial Analysis
  1. When companies decide how much debt to take on, it’s really important to think about both the good and the bad sides of debt. Debt can help a company save on taxes and keep managers in check, but it also increases the risk of financial problems.
  2. There are real benefits to using debt, like tax savings, but many people get distracted by myths about debt being better for returns. It's crucial to understand that higher debt can also raise costs, especially if companies run into trouble.
  3. Different industries handle debt in various ways. For example, companies in technology tend to use less debt, while capital-heavy industries, like trucking and telecom, often carry more. Understanding this can help investors see the bigger picture.

January 2017 Data Update 7: Profitability, Excess Returns and Governance

Musings on Markets • 0 implied HN points • 30 Jan 17
💼 Business Corporate Finance Investment Analysis Company performance Financial Metrics Governance
  1. Companies need to earn more than their cost of capital to be successful. Just making money isn't enough; they must create value for their investors.
  2. Return on Invested Capital (ROIC) is a common way to measure how well a company is doing, but it has its flaws. Investors should be careful when interpreting this metric for young or troubled companies.
  3. There are many companies that are not creating value for their shareholders, with a large number classified as 'value destroyers.' This can limit resources for better investment opportunities in the economy.

January 2017 Data Update 6: A Cost of Capital Update!

Musings on Markets • 0 implied HN points • 26 Jan 17
💰 Finance Investment Corporate Finance Valuation Equity Debt
  1. The cost of capital is a key number in finance that helps companies decide if they should invest. It's important because it serves as a hurdle rate, a discount rate, and influences how much to return to investors.
  2. Calculating the cost of capital involves understanding both equity and debt. The cost of equity reflects what investors expect to earn, while the cost of debt shows how much it costs to borrow money.
  3. The cost of capital can vary by country and industry due to factors like risk and tax rates. Analysts often focus too much on refining these numbers, while the real challenge lies in accurately estimating earnings and cash flows.

January 2017 Data Update 5: A Taxing Year Ahead?

Musings on Markets • 0 implied HN points • 25 Jan 17
💰 Finance Taxation Investment Corporate Finance Economic Policy Cash Flow
  1. Taxes greatly impact a business's value because they affect cash flows after taxes and the cost of capital. Companies must consider their tax burden when planning finances.
  2. The U.S. has a high marginal tax rate, and its tax policies can lead to situations like trapped cash, where companies hold large amounts of unremitted foreign income to avoid hefty taxes.
  3. Changes in tax law can create winners and losers among companies, depending on how the new regulations affect their effective tax rates and financial structures. This could shift where and how companies choose to operate.

January 2017 Data Update 4: Country Risk Update

Musings on Markets • 0 implied HN points • 24 Jan 17
💰 Finance Investment Risk Analysis Market Trends Global Economics Corporate Finance
  1. Where a company operates affects its risk more than where it is incorporated. So a US company can face risks of emerging markets just like local companies.
  2. Not all country risks are the same; some can be managed through diversification in investing. Some risks are country-specific, while others affect all global investors equally.
  3. Understanding country risks helps in corporate finance decisions and in accurate company valuation. This is crucial for investors and companies looking to invest in different countries.

Myth 5.3: Growth is good, more growth is better!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investing Corporate Finance Economic Growth Financial Analysis
  1. Growth isn't always good. It often comes with costs and needs to be carefully managed.
  2. The value of a company is more about how efficiently it can grow, not just how much it grows.
  3. When estimating future value, it's important to consider reinvestment and returns on investment, as they affect both cash flow and growth potential.

Valeant: Information Vacuums, Management Credibility and Investment Value

Musings on Markets • 0 implied HN points • 20 Apr 16
💰 Finance Investment Market Analysis Corporate Finance Stock Valuation Risk Assessment
  1. Valeant experienced rapid growth by acquiring other companies and raising drug prices, which attracted many investors. However, this model was risky and heavily relied on debt.
  2. The company's troubles began when it faced scrutiny over its pricing strategies and financial practices, leading to a significant drop in stock value. Without financial transparency, investors became concerned about its future.
  3. Valeant's management credibility waned amid delays in financial reports and legal issues, making it clear that the previous business approach could not be sustained. Investors now have to tread carefully, as the company's future is uncertain.

Race to the top: The Duel between Alphabet and Apple!

Musings on Markets • 0 implied HN points • 15 Feb 16
💼 Business Market Analysis Corporate Finance Investment strategy Economics
  1. Apple's recent earnings show mixed results, with record profits but lower iPhone sales. Investors reacted negatively, suggesting concerns about future growth.
  2. Alphabet's earnings surpassed expectations, highlighting strong revenue growth and profit margins. The company's core business remains robust, keeping it ahead in market valuation.
  3. When comparing as investments, Apple might be seen as a safer bet due to its strong value at low growth expectations, while Alphabet relies on consistent high growth to maintain its price.

January 2018 Data Update 10: The Price is Right!

Musings on Markets • 0 implied HN points • 06 Feb 18
💰 Finance Investment Valuation Market Analysis Financial Metrics Corporate Finance
  1. Value and price are not the same. Understanding this helps investors make better decisions since market behavior can reward actions that don't create real value.
  2. Pricing an asset involves finding similar traded assets, choosing a good pricing metric, and scaling correctly. These steps are important for accurate valuations.
  3. Investors should be aware of the global differences in pricing multiples, like PE ratios and book value ratios, as they indicate how markets value companies in different regions.

Oracle of Omaha, Warren Buffett, has slashed Berkshire Hathaway's stake in $AAPL holdings by 50%.

Apple Wire • 0 implied HN points • 03 Aug 24
💼 Business Investing Stock Market Economy Corporate Finance Financial News
  1. Warren Buffett's company, Berkshire Hathaway, has sold half of its Apple stock, dropping their holdings from 790 million to 400 million shares. This surprised a lot of people in the investment world.
  2. Despite this sell-off, Apple recently reported strong earnings, showing a revenue increase of nearly 5% and profits up almost 8% compared to last year. This is good news for Apple, even with Berkshire reducing their stake.
  3. Berkshire Hathaway has also been selling other investments, including shares in Bank of America, and now has a significant amount of cash available, totaling $277 billion. This could mean they are preparing for new investment opportunities.

The Rise of SPACs: IPO Disruptors or Blank Check Distortions?

Musings on Markets • 0 implied HN points • 09 Jun 21
💰 Finance Investment Capital Markets Regulations Corporate Finance Market Trends
  1. SPACs, or Special Purpose Acquisition Companies, have become a popular way for private companies to go public quickly. They raise money first and then look for a company to buy, which can save time compared to traditional methods.
  2. While SPACs can offer benefits like faster deals and more flexibility, they also come with downsides. The sponsors often benefit the most, which can leave regular investors with less value in the end.
  3. The rise of SPACs is linked to current market trends, such as low interest rates and high stock prices. However, as markets change, the weaknesses of SPACs may become more apparent.

Data Update 4 for 2021: The Hurdle Rate Question!

Musings on Markets • 0 implied HN points • 10 Feb 21
💰 Finance Investment strategy Risk Assessment Capital allocation Market Analysis Corporate Finance
  1. A hurdle rate is the minimum return a business wants from an investment based on its risk. If it's set too high, the company might miss good opportunities.
  2. There are different ways to calculate a hurdle rate, like looking at the cost of raising funds or considering the risk of the specific project. Using the right method helps better match the risk and reward.
  3. Hurdle rates can change based on business type, geography, and currency. It's important to understand these factors to make smart investment decisions.