Author Archives: Edward Brownlee

Investing: High CAGR, High ROIC, and Low WACC

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“Every investment is the present value of all future cash flow.” — Everyday Money 

The value of any investment is determined by discounting all expected future cash flows (both inflows and outflows) to their present value using an appropriate discount rate. This process accounts for the time value of money, which recognizes that money available today is worth more than the same amount in the future due to its potential earning capacity.

Regarding stock investments, there are very few public companies that consistently have these four important metrics (high CAGR, high ROIC, low WACC, and high free cash flow growth), which indicate the potential for long-term growth and appreciation,

Key Metrics:

• High CAGR: Indicates strong revenue or profit growth over a specific number of years.
• High ROIC: Shows efficient use of capital to generate profits.
• Low WACC: Suggests lower financing costs, making growth more valuable.
• High Free Cash Flow Growth: Reflects increasing cash available for investment or shareholder returns.

Public companies with exceptionally high return on invested capital (ROIC) are typically terrific long term investment. High ROIC indicates that a company is efficient in utilizing capital by generating substantial revenue growth and returns well above its cost of capital.

ROIC that far exceeds its weighted average cost of capital (WACC) means the company is not just profitable, but also highly efficient at converting invested capital into profits—every dollar invested yields a much higher return than the company’s cost to raise and deploy that capital.

Investors value companies with high ROIC because they are seen as more likely to create shareholder value over the long term.

Companies with strong ROIC, combined with robust earnings, sales, and cash flow growth, can signal the potential for continued stock price appreciation and makes it attractive to both growth and value investors. Since investing is the effectively the discounted present value of all future cash flow.

Investing is fundamentally about estimating and valuing all future cash flows in today’s dollar terms, accounting for risk and the opportunity cost of capital. The value of an investment is determined by the sum of its expected future cash flows, adjusted for the time value of money by discounting them to the present.

Moreover, a high ROIC is often associated with competitive advantages, pricing power, and efficient management, all of which support a higher valuation multiple for the company.

Definitions:  CAGR (compound annual growth rate), ROIC (return on invested capital), WACC (weighted average cost of capital).

Getting 1% Better Everyday

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“If you can get 1 percent better each day for one year, you’ll end up thirty-seven times better by the time you’re done. Conversely, if you get 1 percent worse each day for one year, you’ll decline nearly down to zero. What starts as a small win or a minor setback accumulates into something much more.” — Jmes Clear

The goal or strategy of getting 1% better every day is a powerful mindset for personal growth and long-term success. The concept is simple: instead of aiming for massive, immediate changes, you focus on making small, consistent improvements each day. Over time, these tiny gains compound, leading to significant progress.

Example:

If you improve by just 1% each day, you’ll be nearly 37 times better after one year (thanks to the power of compounding: 1.01^365 ≈ 37.78).

Why Does It Work?

• Sustainable: Small changes are easier to stick with than drastic overhauls.
• Motivating: Progress is visible and measurable, which keeps you motivated.
• Compounding Effect: Tiny gains accumulate and multiply over time.

How to Apply the 1% Better Mindset

1. Set Clear, Small Goals

• Break down big ambitions into daily, manageable actions.
• Example: Want to read more? Start with 5 pages a day.

2. Track Your Progress

• Use a journal, app, or habit tracker.
• Celebrate small wins to stay motivated.

3. Reflect and Adjust

• At the end of each day, ask: “What did I do 1% better today?”
• Identify what worked and what you can tweak.

4. Be Patient and Consistent

• Results won’t be instant, but consistency will pay off.
• Remember: It’s about progress, not perfection.

Areas to Apply This Mindset

• Health: Exercise a little more, eat one healthier meal, improve sleep habits.
• Learning: Study a new word, practice a skill, read an article.
• Work: Organize your desk, automate a task, improve communication.
• Relationships: Listen more, express gratitude, reconnect with a friend.

Author James Clear explains that making 1% improvements each day over time, these small gains compound and lead to remarkable long-term results. If you get 1% better every day for a year, you become about 37 times better by the end of the year.

This compounding effect is similar to how money grows with compound interest—the benefits of good habits multiply as you repeat them, while the costs of bad habits also accumulate if you get 1% worse each day. The real impact of these tiny changes is only visible after months or years, creating a significant gap between those who make small positive choices and those who do not

“Success is the product of daily habits—not once-in-a-lifetime transformations.”
— James Clear, Atomic Habits

Final Thoughts

Focusing on getting 1% better every day is a simple but profound way to achieve lasting improvement. Start small, be consistent, and watch your efforts compound into extraordinary results!

The Next Palantir – Part 2

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The following companies challenge Palantir dominance across government, defense, and commercial markets, offering alternative platforms for big data integration, analytics, and AI.

Palantir’s main competitors include AI software, data analytics, cloud platforms, and defense technology. Key competitors include:

C3.ai is a direct rival in AI-driven enterprise software, often compared to Palantir for its data analytics and artificial intelligence solutions.

Salesforce and Alphabet compete in AI-enhanced analytics and workflow automation.

Additionally, companies such as Snowflake, CrowdStrike, Cloudflare, SAP, Atlassian, and Alteryx compete in data analytics, cybersecurity, and enterprise software markets. 

Wealth Lessons from Millionaire Next Door

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“Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.” ~ The Millionaire Next Door

Key lessons from The Millionaire Next Door focus on habits, beliefs, behaviors, and mindsets that enable individuals to build significant wealth over time.

The most important lessons include:

1. Live well below your financial means

  • Spend less than you earn.
  • Save and invest the difference or even better advice, pay yourself first and spend the difference.
  • Avoid lifestyle inflation as your income and net worth grow.

2. Save and invest a significant portion of your income.

  • Invest at least 10% of your income in stocks every single month.
  • When you invest periodically, you don’t have to worry about market timing.
  • Consistency matters more than perfection in investing.

3. Have a long term financial plan

  • Set clear financial goals and create a plan to achieve your goals.
  • A long term plan keeps you focused when short term noise gets loud and market volatility goes hyperbolic

4. Create passive income

  • If you aren’t making money while you sleep, you will work until you die.
  • Create passive income by investing in stocks.

5. Be frugal

  • Always avoid unnecessary spending and expenses
  • Investing is all about delayed gratification.
  • Every dollar you don’t spend is a soldier fighting for your financial freedom.

6. Avoid debt and leverage

  • If you are smart, you don’t need it; if you’re not smart, you shouldn’t use it.
  • Buying a house or real estate are the only justifiable events to use debt.

7.  Invest in yourself

  • Always keep learning, growing and improving yourself.
  • Reading as much as you possibly can is one of the best ways to learn and grow.
  • The more you learn, the more you earn both personally and financially.

Financial freedom and a fulfilling life awaits you, but it starts with your beliefs, thoughts, habits, and mindset. Believe you can and you shall.  Think positively and embrace a growth mindset.

Buy the car. Take the trip. Enjoy the coffee.
Spend money on what makes you happy. Life’s short.
But never spend money at the cost of your financial future.

Have fun and live life fully, but stay smart and invest in your future.

The Next Palantir Stock

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What is the next Palantir?

Investing metrics and valuation which are essential:

1. Market Cap vs Enterprise Value – provides an indication of long term debt

2. Gross Profit Margin – how much revenue is falling to the bottom line…how effective are they in making money.

3. Free Cash Flow and Net Income – are they generating cash flow and Net Income. Free Cash Flow and Net Income should be about the same.

4. Revenue Growth – is the company growing revenue at a high rate year-to-year.

5. Return on Invested Capital – determines objectively how effective the company is realizing returns on re-investing its capital

“Market Leaders” tend to lead the market in both bull and bear markets. They lead in rising during up markets and lead in falling during down markets.

Life’s Essential 8 of Health

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“Life’s Essential 8” refers to a set of eight key factors identified by health experts, particularly the American Heart Association (AHA), that are crucial for maintaining cardiovascular health and overall well-being.

The 8 Essential Factors for a Healthy Lifestyle 

1. Manage Blood Pressure – Keeping blood pressure within a healthy range reduces the risk of heart disease and stroke.

2. Control Cholesterol – Maintaining healthy cholesterol levels helps prevent plaque buildup in arteries.

3. Reduce Blood Sugar – Managing blood glucose levels lowers the risk of diabetes and related complications.

4. Get Active – Regular physical activity strengthens the heart and improves circulation. Experts recommend 150 – 180 minutes of weekly exercise.

5. Eat Better – A balanced diet rich in fruits, vegetables, whole grains, and lean proteins supports heart health. Eliminate added sugars, refined carbohydrates and processed foods.

6. Lose Weight – Maintaining a healthy weight and body mass index (BMI) reduces strain on the heart and lowers disease risk.

7. Stop Smoking and Reduce Alcohol Consumption – Avoiding tobacco use and consuming alcohol in moderation are two of the most important steps to protect cardiovascular and metabolic health.

8. Get Quality Sleep – Adequate, restful sleep supports overall health and reduces cardiovascular risk.

Life’s Essential 8 factors collectively address lifestyle and biological markers that influence heart health and longevity. By focusing on these areas, you can significantly reduce your risk of heart disease, stroke, diabetes, and other chronic conditions, leading to a healthier, longer life.

Tips for Implementing Life’s Essential 8:

• Monitor your blood pressure and cholesterol regularly.
• Incorporate at least 150 minutes of moderate exercise per week.
• Choose nutrient-dense foods and limit processed sugars and saturated fats.
• Aim for 7-9 hours of quality sleep each night.
• Seek support for smoking cessation if needed.
• Consult healthcare providers for personalized advice and screenings.

Finally, strong personal relationships are linked to lower rates of anxiety and depression, higher self-esteem, and greater feelings of happiness and belonging.

Healthy relationships can strengthen your immune system, help you recover from illness, and may even extend your lifespan. People with strong social ties tend to live longer, enjoy better quality of life, and maintain a greater sense of purpose.

The Greatest Wealth is Your Health, Your Relationships, and Gratitude!

Source:  https://www.heart.org/en/healthy-living/healthy-lifestyle/lifes-essential-8

How to Beat the Market

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“You don’t add value by rehashing the consensus — that’s already discounted in markets. I don’t think anybody’s gonna pay you very much for that..” ~ Gary Shilling

Top financial forecaster Gary Shilling believes that to beat the market, you must go against the consensus—but not simply as a contrarian for its own sake.

Shilling suggests that you, as an investor, need to identify rare situations where the consensus is clearly wrong and a major trend is developing. When you spot such an opportunity, act decisively.

Shiller emphasizes that most people can’t consistently beat the market because, on average, the market reflects all available information. Only by being correct when others are not can you outperform the market.

Your Network Equals Your Net Worth

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Your Network = Your Net Worth

“You are the average of the five people you spend the most time with.” ~ Jim Rohn

Jim Rohn once said that “You are the average of the five people you spend the most time with”.

Rohn’s statement suggests that your relationships have a direct and significant impact on your net worth—not just financially, but also in terms of happiness, growth, and success.

Rohn emphasized that the people you surround yourself with can either lift you up or hold you back, shaping your beliefs, standards, and ultimately, your results in life.

Literally, the people who surround you can be a tailwind propelling you faster and farther forward; or, they can resemble a headwind slowing you down and limiting you progress.

Many successful people intentionally seek out relationships with others who have the qualities or financial status they aspire to, believing that their own net worth will reflect the average of those in their inner circle.

You should also seek out relationships that enhance your life.  You should:

• Evaluate your circle: Are they dream-chasers or dream-killers? Are they helping you grow or keeping you stuck?
• Be intentional about building relationships with people who inspire, challenge, and support your goals.
• Loyalty is important, but not at the expense of your own growth. Sometimes, outgrowing old relationships is necessary to reach your potential.
• Healthy relationships are built on service, commitment, and loyalty, but you must also seek relationships that nurture your ambitions. Life is best lived in service to others.

Evaluate your inner circle and know that if you want to shift your life, you need to find a new and improved inner circle. Invest in relationships that contribute positively to your life, and be that person for others. Your social circle is a key driver of your net worth and overall success.

Source: https://www.business.com/articles/10-principles-of-success-quotes-to-inspire-from-jim-rohn

True Wealth is Your Health, Your Relationships and Gratitude. 

Joel Greenblatt’s Investment Philosophy

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Joel Greenblatt’s core investment philosophy centers on value investing: buying quality companies at attractive prices using a systematic, rules-based approach.
• He aims to remove emotion and guesswork from investing by relying on quantitative metrics rather than subjective judgment.
The Magic Formula
• The strategy ranks stocks based on two key criteria:
• High earnings yield (undervalued stocks): Calculated as EBIT (Earnings Before Interest and Taxes) divided by enterprise value.
• High return on capital (quality companies): Calculated as EBIT divided by (Net Fixed Assets + Working Capital).
• Companies are ranked for both metrics, and the best-ranked (lowest combined rank) are selected for investment.
Implementation
• Excludes small-cap, financial, utility, and foreign companies.
• Invests in 20–30 top-ranked companies, rebalancing annually and holding for at least 5–10 years.
• Sells losers before one year (for tax loss harvesting) and winners after one year (for long-term capital gains benefits).
Philosophy in Practice
• Greenblatt’s approach is rooted in classic value investing, emphasizing discipline, simplicity, and long-term consistency.
• The goal: systematically buy good companies at bargain prices, minimizing emotional biases and maximizing returns