IFB66: Should You Research Owners Earnings or Options?

Welcome to Investing for Beginners podcast, this is episode 66. Today we’re going to talk about several different topics, we’re going to talk a little bit about owners earnings. Which is one of Warren Buffett’s favorite formulas, if you will, or thoughts and ideas on how he looks at a business. And we’re also going to talk a little bit about options and before we start talking about those I’d like to tell you about a book I just read recently.
Just a quick note, there are several affiliate links sprinkled throughout the transcript.
It’s called F Wall Street and it was a fantastic book it was very easy to read and it is not full of jargon if you will. There’s not lots of technical terms in there.
He’s very good at explaining and breaking down different ideas like owners earnings. For example, he also talks a little bit about intrinsic value. He also talks about certain types of cash flows.
But again it’s not super jargon there’s not a lot of math and even the math that’s in there is super simple and the other thing that’s kind of cool about it is he comes from it as an angle he’s a quote unquote insider he’s somebody that works in the business he buys and sells stocks for people that want to invest.
But he comes at it as an angle of everybody in Wall Street’s out to get something from you and he’s not and it’s very his language is very it’s not rough but he’s very sarcastic is probably the best way of putting it.
Especially attitude yeah thank you that’s the better way of putting it yeah there’s a lot of attitude and he’s definitely coming in at have added advantage of looking at Wall Street as sort of the enemy and when I say Wall Street he’s really talking more about the big funds and people that are out there trying to hustle as opposed to somebody’s they’re trying to help you invest your money and it’s a great book I really enjoyed it it’s not very long it’s about 250 pages give or take and it’s very fascinating.
I would highly recommend it it’s something that something new that I came across. I know Andrew would read it recently and he never you never sale yours that I didn’t read a little bit of it uh and uh he had recommended it to me based on his partial reading of it and I really enjoyed you didn’t really recommends that book for Jae Jun he does and I think he gets you can tell by some of his writing that he gets some of his ideas from that book so it was pretty cool so Andrew why don’t you start us off talk a little bit about owners earnings and we’ll have a little roundtable on that and we’ll talk about options.
Andrew: yeah sounds good so  what’s the purpose of owners earnings Warren Buffett was the first one to really kind of popularize this idea and so I guess to kind of explain owners earnings we need to explain what earnings are and at the risk of getting too technical need to explain how earnings is kind of tabulated.
Obviously earnings drives Wall Street right so when you see earnings growth that’s what the analysts are all focused on they’re looking at revenue growth earnings growth and that tends to make the stock either pop up or dive down and sometimes it can happen even though it’s not logical right so a company could do better than their expectations with earnings growth and still have the stock pop up or up or down.
That’s kind of a discussion for another day however the basic idea of earnings growth makes a business grow once you have more earnings you have more profit you can reinvest in the business yo...