What Does Modigliani-Miller Theorem - M&M Mean?
A financial theory stating that the market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends. Remember, a firm can choose between three methods of financing: issuing shares, borrowing or spending profits (as opposed to dispersing them to shareholders in dividends). The theorem gets much more complicated, but the basic idea is that, under certain assumptions, it makes no difference whether a firm finances itself with debt or equity.
To calculate Cost of Capital:
COC= COE+ (COE-COD)* D/E ratio
The principal objective of the Cash Flow Portfolio is to generate reliable and consistent income from investments, while protecting investment capital through diversification. This income may come from stock or mutual fund dividends, interest from bonds and money market investments. Other forms of positive cash flow may be capital gains from sales of equities or from exchange of foreign currencies.
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About Me
TLassen is a 50-something private investor, despite being licensed for securities trading and portfolio management in Canada, has found himself in the Manufacturing environment for the last 30 years. His career has been spent predominantly in the aerospace industry and he is currently responsible for maintaining compliance to AS and ISO standards for a midsized company in Montreal.
His investment methodology is based on the concepts of economic added value. In plain English, investment returns have to be measured against investment costs. He uses fundamental analysis at the company level to identify best of breed companies and combined with the principles of economic added value, selects companies for long term investments.
The subtle point of Warren Buffet's statement, 'it is better to find a great company at a fair value, than a fair company at a great value' is often missed by investors who attempt to find undervalued companies regardless of their financial health. He belongs to the Buy and Hold camp, but has learned over the years to be flexible by taking profits off the table occasionally.
TLassen maintains 2 portfolios whose principal objectives are to generate reliable and consistent income while protecting investment capital through diversification. This income may come from stock or mutual fund dividends, interest from bonds and money market investments. Other forms of positive cash flow may be capital gains from sales of equities or from exchange of foreign currencies.
In other words diversify, diversify, and diversify some more, between and within the 4 asset classes: Stocks, Bonds, Cash and Tangibles.
His investment methodology is based on the concepts of economic added value. In plain English, investment returns have to be measured against investment costs. He uses fundamental analysis at the company level to identify best of breed companies and combined with the principles of economic added value, selects companies for long term investments.
The subtle point of Warren Buffet's statement, 'it is better to find a great company at a fair value, than a fair company at a great value' is often missed by investors who attempt to find undervalued companies regardless of their financial health. He belongs to the Buy and Hold camp, but has learned over the years to be flexible by taking profits off the table occasionally.
TLassen maintains 2 portfolios whose principal objectives are to generate reliable and consistent income while protecting investment capital through diversification. This income may come from stock or mutual fund dividends, interest from bonds and money market investments. Other forms of positive cash flow may be capital gains from sales of equities or from exchange of foreign currencies.
In other words diversify, diversify, and diversify some more, between and within the 4 asset classes: Stocks, Bonds, Cash and Tangibles.
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