As per what I understand from your twitter debate, in Moats one should compare owner’s earnings with reported earnings, and where owner’s earnings are more than reported earnings, one should go for that stock(provided other parameters met). But calculating owner’s earnings requires a lot of judgement because one really needs to have the vision of how earnings will look like a decade from today , which beginners like me are incapable to calculate with some confidence. So to keep matters simpler can we take this route to begin with: Where if two businesses have shown signs of economic moats in the same industry, we should favor the one which has a conservative accounting. Moreover, Stephan Penman in his wonderful book, Accounting for Value, says about calculating the Value of the company by judging how the book value or NOA will behave in the next three years. Here too you need extreme caution, any judgement error here can also be fatal. But I guess this method is slightly easier to follow than calculating owner’s earnings. Do you subscribe to Penman’s view?
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