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Lessons from Buffett’s Investing Framework
Motley Fool Money
Why Buffett Pays Low PE and Earning Yield?
Buffett has this sweet spot of businesses between, let's say about nine times earnings to about 13 times earnings. The inverse of low PE or low price of free cash flow ratio that Buffett is looking for is a high earning yield or a high free cash flow yield. Unlike a bond coupon that is fixed, hence the term fixed income, if we're investing in growing businesses, then the coupon is going to grow. And so when you pay lower multiples, a lot of bad news is already priced in.
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