25 November 2011

Cash Machine: Low Capital Expense (CAPEX) + Low Fixed and Variable Costs

"Most successful companies earn a lot while using little, and firms that spend little and sell their wares quickly are best" - Stock Screen by Jack Hough in Smart Money (October 2009)

I am quite agree the statement of Jack. In fact, if a particular company can do what Jack said, it is a supreme company. Only supreme company can reduce or maintain a very low Capital Expense (CAPEX) and other fixed and variable costs to grow its business. With a very low CAPEX and other costs, this kind of company is the so-called "Cash Machine". Every day, the goods or services of the company will become CASH, and then, only portion of CASH is consumed by CAPEX and other costs, and the remainder cash, of course, will soon flow into shareholders' pocket (as dividend) or retained to expand its business significantly (business acquisition).

Actually, there are quite lots of CASH machine companies. But the problem is most of them have very high market prices because its current shareholders do not want to sell their CASH machine and other investors always hope can be one of them with good price. Therefore, I always remind myself that never ever sell potential CASH machine companies.

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Written by: Xaivier Chia


1 comment:

adam joseph said...

Business loans are given to the business persons and with complete documentation and some surety and it is very important to take the surety.

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