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You want to invest in companies that generate a lot of cash.
But you know what’s even better?
Companies that:u
Generate a lot of cash
Are growing attractively
Trade at cheap valuation levels
The good news is you can easily achieve this via some well-chosen ETFs.
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The Buffett Mindset
When you look at a ticker on a screen, it’s easy to forget what you’re actually buying.
Warren Buffett has called The Intelligent Investor by Ben Graham the best investing book ever written.
Here are the three most important takeaways:
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The most important thing?
When you buy a stock, you become the owner of that company.
It’s like buying a part of your local butcher across the street.
And it also means: if you buy 1 share of a company, you should be willing to buy the entire business if you had the money.
So just imagine you buy 1 share of Apple today.
In that case, you would be willing to buy the entire company for $4.6 trillion and you think it’s worth more than that.
PS If you have $4.6 trillion available, please send me a DM.
I’m just kidding of course… Or not? 😉
What’s the Purpose of a Business?
If owning a stock makes you a business owner, it’s worth asking what the purpose of a business is.
I think the easiest way to answer this is to think about a small, local business.
You probably have a gas station or convenience store in your town.
Let's use this as an example.
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The owner runs the business to make sure your car is fueled with gas, and that you’re fueled with coffee or snacks.
But the real purpose?
To sell you those things so that the owner earns an income.
Which, of course, means cash.
A business can look profitable on paper…
But if it has to reinvest every dollar into inventory or repairing gas pumps, it's not a great business.
Why would you want to own it?
As an investor, you want businesses that produce a lot of Free Cash Flow (FCF).
Free Cash Flow is the real cash a company generates after deducting all expenses.
It’s basically all cash that comes in minus all cash that goes out.
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Two ways to win
The beauty of being an investor?
You have more than one way to win.