RULE ONE INVESTING - TRANFORMATIONAL INVESTING COURSE

The requirements for a RuleOne business, they have to be wonderful and they have to have an
attractive price.

Meaning, Moat, Management, MOS. In that order.

The first evaluation is based on EPS. The second is based on FCF. The third is based on owner’s earnings.

As a RuleOne investor we must be investigative about the companies we are considering. Look for
relevant articles and reviews on industry websites and Google. SeekingAlpha and GuruFocus.

8 Year Payback on a publicly traded company is half of the usual payback time to get your money off the
table if you were to buy the whole company. It’s equivalent to the PBT of a private company.

The MOS and Future PBT is based on FGR.

Net Income divided by the amount of available shares equals EPS. FCF is calculated by deducting
Purchases of Property, Equipment from Cash From Operating Activites. FCF/EPS gives us FCF per Share.

Owners’ Earnings is calculated by adding Net Income, Depreciation & Amortization, and Deferred
Income Taxes, then subtracting Purchases of Property, Equipment. Owner’s earnings / by the amount of
shares, equals the Cap Rate. Multiply it by 10 and you’ve got the 10Cap Rate.

***The key is to read and then read some more.

The difference between what a company owns and what it owes is the “Book Value”.