Garrett Blackwood

Garrett Blackwood
Contributor since: 2012
You are correct in that Greenblatt's orginal formula uses EBIT and not EBITDA. I prefer to use EBITDA as to achieve a true base level of cash flow due to Dep and Amort being non-cash items. I do concede that by including Dep and Amort, EBIT considers the investment required to achieve profitability (by estimating capital expenditures), but I have other formulas that directly account for Cap Expend when I am calculating a target price.
I used the term "assassin" to evoke the image of a quiet, calculating and intensely focused person. An investor such as Klarman and an assassin share many of the same attributes despite the huge differences in their goal.
An assassin does not want to draw attention to oneself, instead choosing to operate in the shadows. Klarman is doing the same, sort of.
Very familiar with Michael Price. I graduated from the University of Oklahoma, which is Michael's undergrad alma mater. In 1997 he seeded an exclusive value investing class that taught students how to invest using his criteria. Michael would even stop by a few times a semester to teach the class. I was lucky enough to be in this class and it is what set me on a path of value investing.
My traditional strategy was the same as Michael's: high security/low cash. Klarman's strategy intrigues me as I was security rich / cash poor when the market bottomed in March 2009, leaving me unable to take advantage of some stellar bargains.
Total lifetime return was criteria used in this ranking.
I use Tobin's Q, the Buffett Formula and the Net-Net Method as screens, not calculations of value, and would never purchase a company solely on the results of these formulas. Yes, I do use a certain portion of the Buffett formula in my final Valuator formula, but the driving factor for my decision is valuation based on comparable multiples. The formulas you have issue with are displayed to simply show that the stock does pass some commonly-used quick formulas.
I do not use a risk-free rate as Buffett does because I do not have crystal clear foresight into the company, and I adjust for that by using a more conservative rate. I would argue that this makes my Buffett result more realistic for use by the common investor.
I also would not recommend buying a company based solely on my analysis. I am simply compiling research and computations and offering an opinion. Anyone who feels my case is compelling should perform their own research, i.e. reading SEC filings and perform their own valuation, before making a decision. has many tools available for investors to run valuations on their own parameters, such as choosing different comparable companies. My hope is that ValueMyStock is easy to use and investors find it helpful for their own analysis.
Thank you for your intelligent questions! First, I used the full year of 2011 for my calculations. The first quarter of 2012 was not included, therefore the net $4.96 million gain on the sale of the linefill did not affect my results. Even if I had used 1Q 2012 results, when using net income I always use net income from continuing operations, making sure I strip out any asset sales, discontinued operations and effects of accounting changes.
The preferred stock, including amortization due to a beneficial conversion, is not factored into my equation. My approach is a strict valuation of operations and stock price as applicable to common shares.
I am unsure how BKEP calculated their leverage ratio shown in the 10-Q. My equation is total debt divided by total equity, which based on their 10-Q would be a ratio of 3.84, which is still lower than the average of the comparable companies used in the article. My 2011 figure of 0.247 appears to be incorrect - I will review my calculation and restate my findings.
hksche2000, see my Chesapeake article ( I agree that their price is quite low when compared to their assets and production capability, but shadowy management is the reason I'm not picking up any of their shares. There are enough opportunities elsewhere for over-punished companies with much better leaders.
No, they are not. Since Blueknight does not take title to the product they are transporting they have limited exposure to the price fluctuations. SemGroup caught a lot of heat because their futures trading was not directly related to their core business, and it ultimately brought down the business.
I agree that there is much less risk investing JPM at today's price, but the point of the article is less about avoiding JPM today and more about being very careful of investment risk in banks. JPM is just an example. Sure, JPM looks attractive now, but there were a lot of naive investors who owned before the $2 billion news broke - I'm just trying to help investors watch out for the next bank surprise.
Totally agree about value investing not being a fad. It requires education, knowledge and work - some people are turned off by this. As Thomas Edison once said: "Opportunity is missed by most people because it is dressed in overalls and looks like work." I have automated several successful value investing formulas on my website as a way to help newbies get started and experienced investors save time.
Very good point about banks and diversification. A good example of how intertwined they are is what happened in 2008 / 2009 when banks started unwinding toxic assets and cutting the value of assets, especially the mortgage-backed securities. Were there any major bank that escaped that era unscathed? I think not.