This week, I’m introducing a new value screen based on a book that was recently recommended to me by reader Jeff Davies.
The book in question (and which I highly recommend to any budding screeners) is The Acquirer’s Multiple by Tobias Carlisle. As its title implies, the book’s “screening” element boils the entire investing process into one simple metric. That, in turn, echoes its author’s philosophy.
Carlisle points out that modern markets are very good at sniffing out economic profitability. Unfortunately, the ability to spot companies capable of consistently sustaining high returns on capital, year after year, is much trickier, because truly ‘quality’ businesses probably account for fewer than one in 20 stocks. Far better, reckons Carlisle, that we acknowledge this challenge from the jump, and instead focus on what we can control, which is to pay as little as possible for a business.