http://www.fool.com/investing/general/2011/12/01/1-stock-to-......

My response:


Anand –

If you look at the total cost of ownership, F sells for 24x free cash flow, per my trusty Old School Value spreadsheet (an excellent tool, btw).

In my experience, buying at these elevated multiples leads to frowny-face performance.

In contrast, Apple sells for just 10x FCF, adjusted for cash ($82 billion) and debt (none). ... - hheiserman | Date: 12/2/2011 7:18:57 PM | Number: 1771

I like to buy private companies at 1.5 to 3.5X Cash-Flow. Public companies at up to 7.5X cash-flow where cash flow is defined as EBITDA.

Last Venture Capital Portfolio returned over 58% compounded, net of fees. Included: Inhale Technology(INHL, now part of Eli Lilly(LLY), Nextel(NXTL, now part of Sprint(S), and PetsMart(PETM), as well as several dozen still private companies.

Kahuna, CFA
Venture Capital
Portfolio Manager

Kahuna, CFA
Venture Capital
Portfolio Manager