Opportunity Zones were created as part of the Tax Cuts and Jobs Act from 2017. Due to the nature of the legislation, business owners and investors had to patiently wait for clarification and the designation of these areas. With the potential to impact over $6 Trillion in capital, and lasting over ten years, Opportunity Zones are certainly worth understanding on a deeper level. In this article we dive into Opportunity Zones in their entirety with a specific focus on the state of Colorado.
The state of Colorado has 126 census tracts federally designated as Opportunity Zones. In addition, Colorado state Governor, Jared Polis announced on February 11th, 2019 the formation of a dedicated office within the Office of Economic Development and International Trade specifically tasked to cultivate and support investment into Colorado’s 126 Opportunity Zones.
If you are evaluating an acquisition opportunity it is vital to understand how well the underlying business model of a company is performing. Earnings are what people talk about, cash is what keeps the business going. It would be logical to assume that cash flow is less prone to manipulation and an overall truer metric for understanding company performance. However, you should know what you see on cash flow statements isn't always what it seems. In this post, we will explore just a few tactics that make cash flow look better than what it is.
Most public companies play to the tune of short-term results. Driven by compensation incentives, management is expected to create a company performance that will meet the praise of investors. Earnings that meet or exceed expectations give way to a rising stock price, and who doesn't like a rising stock price? It is the pressure (or incentive) of short-term results that often lead management to actions of unethical tactics. In this post, we will explore ways management can artificially boost earnings through the manipulation of liabilities and expenses.
The list of wholly own subsidiaries by Berkshire Hathaway can be somewhat astounding. It is no secret Warren Buffett loves buying companies whole. What you may or may not know is that he also encourages the companies he acquires to pursue acquisitions of their own. While you can find a current list of subsidiaries on the Berkshire Hathaway website, we took it upon ourselves to map out the overall architecture of this conglomerate. The visual below includes not just those direct subsidiaries but also the directly owned subsidiaries of those companies.
We attempted to visually organize the list in a similar format as to how Buffett classifies the businesses inside his annual shareholder letter. Buffett reports the entirety of Berkshire Hathaway in four separate categories:
It is not likely that you will hear an Analyst praise a company’s increase in average days payable. Nor will you hear a CEO boast about having an industry low DIO. It’s not even common that a company will go out of the way to alert you that their DSO is improving, even though that would mean they are receiving cash faster. While these metrics are far from popular, they form the basis for the calculation of the Cash Conversion Cycle or CCC.
The Cash Conversion Cycle isn’t exactly a headline-grabbing metric in itself. It is primarily used by accountants and business operators to gauge the efficiency and internal performance of the business. While not an overly popular metric, understanding it can give you a leg up on spotting an opportunity.
In this post, we will discuss what the Cash Conversion Cycle is, how you can calculate it, and how you can use it to your advantage.
What is the Cash Conversion Cycle?