Investing Glossary

Excess return of an investment relative to a benchmark. Positive alpha means the stock beat the market after adjusting for risk taken.

A measure of a stock's volatility relative to the market. Beta above 1 swings more than the market; below 1, less.

A company's net asset value on the balance sheet (total assets minus liabilities), per share or in total. A floor reference for value investors.

The premium a strong brand lets a company charge and the loyalty it commands—a durable, often underappreciated moat.

How a management team deploys capital—reinvesting in the business, buying back shares, paying dividends, or making acquisitions. Buffett treats it as management's most important job.

The smoothed annual growth rate of an investment over a period, as if it grew at a constant rate each year.

A valuation method that sums a business's future cash flows, discounted back to today at a required return, to estimate intrinsic value.

Annual dividends per share divided by the share price—the income return an investor receives from owning the stock.

Net income divided by shares outstanding; a basic per-share measure of profitability.

Earnings before interest, taxes, depreciation, and amortization; a rough proxy for operating cash generation before capital spending.

A durable competitive advantage that protects a company's returns from competitors—the core of long-term quality.

A company's total value including debt and excluding cash—what a buyer would pay for the whole business, not just its equity.

Cash a business generates after capital spending—the raw input to any DCF valuation.

Buying companies expected to grow earnings faster than the market, often at higher valuations. Contrasts with value investing's margin-of-safety focus.

A business's true worth based on the cash it can return over its life, distinct from its fluctuating market price.

The gap between intrinsic value and the current price—the buffer that protects you if your estimates are too optimistic.

Total market value of a company's equity: share price multiplied by shares outstanding.

Total debt minus cash and equivalents; a measure of balance-sheet leverage and financial strength.

A product or service becomes more valuable as more people use it, creating a self-reinforcing moat.

Buffett's preferred cash-flow measure: reported earnings plus non-cash charges, minus the capital needed to maintain the business.

Market price divided by book value per share; a valuation gauge most useful for asset-heavy businesses.

Share price divided by earnings per share—a quick, imperfect valuation gauge that says nothing about growth or quality.

Net income divided by shareholders' equity; a core measure of how efficiently management uses owners' capital.

Profit earned per dollar of capital employed; a primary signal of business quality and moat strength.

A company repurchasing its own shares, concentrating ownership and lifting per-share value when done below intrinsic value.

The friction a customer faces in leaving a product or vendor, which locks them in and protects a moat.

Buying securities for less than intrinsic value, protected by a margin of safety—the discipline behind the ValueOS tools.

The discount rate used in a DCF; the blended cost of debt and equity a business must earn to create value.