As value investors, we buy a business because of the cash surplus it will generate over the time we own it. As the business generates more cash surplus every year, the equity or book value of the business also increases. Remember that equity is what is left for the business owners if the business were to cease operation today, pay off its debt, and liquidate its physical assets (this also includes cash surplus held by the business). It is important to recognize that a stock is a value-producing asset. We don’t buy a stock because we hope someone else will…

Obi Akubue

Founder, Decode Investing.

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