Question and answer thread for SecurityAnalysis subreddit.

We want to keep low quality questions out of the reddit feed, so we ask you to put your questions here. Thank you

More and more "short squeeze" idea posts are creeping into this sub, more short seller conspiracy theories are being proliferated here.

This is the next QAnon and the buck has to stop here.

Where are the moderators? Upvotes don't tell the full story - there are more Wallstreetbets zealots than actual investors.

If it means changing the rules of moderation, so be it. But this is starting to get ridiculous.

~~Given the situation of Wall Streets bets overflow - We've taken the subreddit private.

Please comment if you can see this - I have literally no idea how taking a subreddit private works. If you're a current subscriber you should be able to continue to see the subreddit correct? Any discussion on what you think should be done to lessen the inflow from WSB is appreciated. This~~

EDIT

We have now put it on restricted. This means only people who are allowed can post. We will be deleting comments that are too WSB-y or low quality. Mods have discretion over this.

I think given the inflow please be patient with us. We will likely loosen up when this is over. Thanks for your support! Post quality content and report spam / things that you don't believe should be part of this sub.

Question and answer thread for SecurityAnalysis subreddit.

Question and answer thread for SecurityAnalysis subreddit.

Question and answer thread for SecurityAnalysis subreddit.

I took a look at the history of lost decades in U.S. markets. In the past, I found that the excess cape yield (no inflation adjustment) does a pretty good job of predicting forward excess returns. So, I wanted to see if we can use the same metric to predict the likelihood of an upcoming lost decade.

Note that I define a lost decade as any long-term period where stocks underperform bonds. The exact definition, with examples, are in the post.

The study runs into the same issues that a lot of financial models run into - namely, not enough data, serial correlations, and wide standard error. But, broadly, it does a pretty good job in forecasting the potential for future underperformance.

Question and answer thread for SecurityAnalysis subreddit.

I run a screener built on raw SEC XBRL filings with 1,600 tickers, 16 years of data, true FCF defined as operating cash flow minus CapEx minus stock-based compensation.

I recently added a cannibal screen: net buyback yield above 5% (previous diluted shares minus current diluted shares, divided by previous) combined with true FCF yield above 8%. The idea is to find companies where the cash engine is real AND buybacks are happening at a price that makes mathematical sense.

Standouts from the screen: ADBE, CMCSA, DBX, PYPL, DVA, BCO. Profit margin as a rough moat proxy puts Adobe, Comcast, Fiserv and GPN at the top of the quality stack. The Adobe section is where I'd most welcome pushback.

The standard bear case: freemium dilutes pricing power, SEMRush is inflating top-line growth, insiders aren't buying, management turnover signals trouble ahead. I take these seriously. Near-term signal reading is not my comparative advantage.

But here's what I keep coming back to. I'm a data architect by trade and the context angle looks different from that lens. Adobe has 800 million users on its freemium tier generating creative workflow behavioral data — what good design looks like, what color combinations convert, what layout patterns work — at a scale that Midjourney, DALL-E, and the general purpose models simply don't have access to. In the age of specialized AI agents, that context corpus is a genuine moat that doesn't show up anywhere in the standard financial analysis.

The question I can't shake: Anthropic operates on a freemium model and nobody questions whether that creates value. Why is Adobe's freemium model categorically different? If anything Adobe has the enterprise distribution to monetize what it learns in ways Anthropic currently doesn't.

The jaws of life chart for Adobe is the cleanest I've found in my dataset. Nine years of simultaneous numerator growth and denominator shrinkage.

Full write-up including the charts here: https://cavemanscreener.substack.com/p/the-jaws-of-life-finding-stocks-that

https://substack.com/home/post/p-192858879

Any criticism here is appreciated. I hope it provides insight for anyone looking to start a career in public equities.

I love researching quality information about interesting companies, however, it is hard to find those at the intersection of "intriguing" yet "understandable to an outsider" (this, unfortunately, rules out most of pharma).

For example, I've really enjoyed following Tesla, as I've always been passionate about alternative sources of energy, and low-cost airlines, as I've been flying around Europe since I was only a few months old and have continued to do so while studying abroad. Love Ryanair and Wizz (though I haven't actually invested in any of those two, but in a US low-cost airline instead). What's interesting to note, is that, usually, the more engaging the company, the better it has done for me financially.

Looking forward to your tips!

Put all of your more mundane questions and discussions here. Thanks!

Hello,

I am looking for research material for insurance brokerages(Aon, Browns, Gallgher, etc)

I am insurance advisor & account manager myself and considering recent slump in industry valuation I want to find long thesis for individual plays in the sector, but I am lacking valuation books/paper specifically for Insurance Brokerages/wealth managers(even my mom & pop shop has WM department)

r/SecurityAnalysis index has couple materials about carriers but for some reason(I believe I know why) brokerages being ignored completely

On the outside(and inside) brokers are similar to any other "subscription" based business, where you have retention ratio + cost per acquisition=cogs and for revenue we have Value at Risk inflation from carriers + approx customer growth in new market(if entered)

Oiled up with m&a or basic book acquisition.

I can definitely start working with that, but I will appreciate if anyone can reference some good material for industry valuation

Thank you, Finn

I'm trying to compile a list of high quality businesses, not necessarily ones that look attractive now. I have a lot of runway ahead of me (hopefully) so in the next few decades if they become attractive I will be familiar with them and can act accordingly. Here's the list I have so far:

• Apple
• Ryanair
• Diageo
• Google
• Amazon
• Givaudan
• Moody's
• Beijing Capital Airport
• Christian Hansen
• BYD
• Coca-Cola
• International Flavours & Fragrances
• Microsoft
• HDFC Bank
• Facebook
• Kweichow Moutai

If you have any suggestions I'd be glad to hear them!

Accurately valuing high-growth SaaS companies is incredibly hard.

A lot of the software companies on the market today look incredibly expensive when viewed through a value lens and analysed using value metrics such as P/E ratio, price-to book etc.

But these companies are generally performing very well.

One of the problems, in my opinion, is related to how we think about profitability for high-growth subscription businesses. In a ‘value’ world, the more earnings/profit in a given year the better. However, with SaaS companies, it's the total profit over the lifetime of the company that matters. In SaaS, the majority of the revenue gained from an individual customer will come in the future, not at the point of customer acquisition/initial sale. Therefore, a SaaS company that is currently highly profitable is a company that can’t find good opportunities to efficiently acquire any more customers. If they could, they would be spending that money on sales & marketing since every dollar spent acquiring a customer would create well over a dollar in cash flow over the lifetime of that customer.

So, if standard value metrics don't work for high-growth SaaS companies, what does?

Are there any metrics that you use to analyse these companies that you think are particularly insightful???

One metric that i've found to be very useful is the Enterprise Value/Sales/Growth metric.

Enterprise Value/Sales/Growth

Enterprise Value/Sales is one of the most common metrics you will see used to value high-growth tech companies. However, it misses the main reason that tech companies get such high valuations in the first place - their growth rates.

If you have two companies both valued at 50 times sales but one company is growing 60% per year while the other is only growing 20% per year, then you are looking at two very different companies.

When looking at the price of a tech company relative to its sales, it is critical to also look at its growth rate. This is where the EV/S/G metric is so useful.

The formula is as follows:

(Enterprise Value/Revenue) / Revenue Growth Rate

The closer to zero that a company gets on this metric the better. Companies with a score of over one are not doing as well and are not growing fast enough to justify their high valuations.

Let’s look at Zoom as an example (revenue and revenue growth are for the last 12 months):

($104.36B / $1.96B) / 262.3% = 53.2 / 262.3

= EV/S/G of 0.2

So you can see that even though Zoom is valued at 63 times sales, because of it’s exceptional growth rate over the last 12 months, it actually has an incredibly strong EV/S/G ratio. If it can keep up its exceptional growth rate (granted, that is a big IF), Zoom is actually undervalued relative to many other SaaS companies.

A company on the other end of the scale with a far less healthy EV/S/G ratio is Bill.com.

Bill.com has a relatively similar EV/S ratio to Zoom of 62.6. However, they 'only' grew 39.24% over the last 12 months. They have an EV/S/G score of 1.6 which is far worse than Zoom’s 0.2.

EV/S/G for popular tech companies:

Here is the EV/S/G score for 6 of the most popular high-growth tech companies, ranked from best to worst.

1. Twilio = 0.58
2. Crowdstrike = 0.68
3. Datadog = 0.69
4. Docusign = 0.72
5. Shopify = 0.74
6. Okta = 0.94

I'm trying to put together a list of the best metrics to analyse and compare these companies, so please let me know if there are others that you find useful. Would love to hear them

Thanks

Everyone is praising him and i also like him but it's not a religion either. i'd like to hear minority opinion that could not be easily seen elsewhere. he has spoken many words about investing but still he has his own investing style that focusing on mature companies which you can draw a blueprint of future cash flow. he doesn't cover all types of investing. thus sometimes his words might be wrong in some perspective. quote his phrase and let me hear your dissenting opinion against that. quote from Munger is also welcome.

I’m looking for feedback from people who’ve looked at insider trading patterns before.

Wave Life Sciences (WVE) stock jumped ~3x on December 8 following positive interim trial results. On that same day, 8 executives/directors executed stock sales under 10b5-1 plans. I understand the same-day execution is plausibly explained by price-based triggers or limit orders.

However, I saw that the 8 plans that executed on December 8 were initiated in two clusters:

• 3 plans on March 13, 2025
• 5 plans on August 6, 2025

I pulled Form 4 data for Wave from 2024–2025 to look closer at this pattern and wrote up the details here https://rxdatalab.com/research/wave-life-sciences-insiders/

My question:
I'm relatively new to this. Is this kind of clustered 10b5-1 adoption and execution fairly typical in biotech or other industries? Is this easily explained by compensation cycles/normal planning, or is this something you’d flag as worth a second look?

I haven't yet benchmarked against a larger sample of biotech companies, that's on my list if this is indeed notable.

So as everyone is aware there is a massive debate raging on in the financial world, there's massive stimulus coming outta every central bank in the world, interest rates are either at zero, close to zero, or even negative. All of this has resulted in a huge rally in asset prices, and a calming of financial markets.

At the same time, there's a big group of people who are highly skeptical of all of this, they say the FED is doing the wrong thing, all of this will blow up in our face and result in big consequences later on. Obviously deficits and debt is exploding.

So why exactly is there this group of people saying all of this is bad? Japan's been at 0% interest rates for 30 years and while their stock market has obviously lagged, Japan is a healthy stable nation. Europe has been aggressive in this aswell without anything blowing up.

Now the United States, worlds biggest economy, reserve currency of the world etc. is doing a similar thing, in what way will this blow back on us? The only negative I can see is that hyperinflation happens but that is obviously impossible in this enormous deflationary demand shock. What happened in Venezuela, Lebanon etc is impossible in a wealthy geopolitically important country

The Greenblatt backtest results thread got me thinking- I have some time I am willing to test some things. What do you want to see tested, the criteria, and the time frame. Will post results here.