Value Investing News

Today we examine David Einhorn's talk on ROE, which he gave at the Value Investing Congress in 2006. Einhorn argues that ROE is only a meaningful metric for capital-intensive businesses—like traditional manufacturing companies, distribution companies, most financial institutions, and retailers. For businesses that are not capital intensive—whose profits derive primarily from intellectual capital or human resources (e.g., pharmaceutical companies, software companies, etc.)—it is “irrelevant to worry about ROE."

• http://widemoatinvesting.wordpress.com/2009/03/09/david-einhorn-and-return-on-equity/ (1)