Friday, 30 January 2015

Financial Orbit wrap 30/01/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. There was a really interesting report from the Peterson Institute on the Chinese services sector which famously is not a high proportion of GDP:



2. Samsung numbers were ok although the smartphone / related area is still seeing intensifying competition despite lower end demand and new products.


3. This excellent piece by Ben Carlson highlighted that even a great stock picker like Keynes showed a lot of volatility in his investment career (although ended up well ahead of his nominal benchmark).  Really interesting read here


4. Onto companies...and a huge number reported.  I mused over Facebook:

A prospective P/E of x40...well if you are a believer this is a peg of around x1.  Here is another metric to think about: free cash flow.  


At the thick end of a US$1bn a quarter that's a free cash flow yield of...c. 2%. 

5. And more excitedly about Alibaba:



Too many years ago to remember a college professor drummed into me the importance of focusing on cash flow when undertaking investment analysis.  Whilst not flawless cash flow is harder to manipulate.  That was a phenomenal free cash flow generation and conversion by Alibaba over the last quarter at 88% of revenue and RMB22.9bn of free cash flow.  When I combined the last two quarterly free cash flow generation numbers and then annualised it Alibaba is currently running at a free cash flow yield of around 4.2%.  That’s really solid to say the least. 

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