Updated Links for Competition Demystified and Ethyl Corp (Robotti)

I highly recommend that you go to the links below to read the PDF of this book. But the PDF lacks many of the graphs and tables so essential to the book. The point is to help you with the cases while you order the book–highly recommended–only about $11 to $15. One of the best books on analyzing businesses that I have stumbled upon. Ironically, the book never became popular like Good to Great and other Pop Management books.  Go here for the PDF of the book: Competition_Demystified__A_


For a book review and link to Amazon’s reviews go here:



Robotti’s Investment Thesis of Ethyl Corporation

Yesterday, the case on Ethyl Corporation was provided http://wp.me/p1PgpH-J3. This is a case on managing a declining business (Lead-based Gasoline became outlawed). For more understanding and background I added an investor’s perspective on Ethyl here: Robotti Mention of Ethyl (See page 25)

The above article also has good analysis of Spin-offs. An excellent read. Thanks to a reader’s heads up!

16 responses to “Updated Links for Competition Demystified and Ethyl Corp (Robotti)

  1. The PDF is missing large chunks of text from page 53 forward. For example, the whole Coors case study is missing.

    • Dear Sid:

      Now you know why the PD is “FREE” That is the best I have at the moment–it is a pitiful substitute for the book. However, there is the HBR case study–just use the search feature on the blog and it will take you to the more detailed HBR case study. I hope you do get the book though. I know you are a “value” guy but splurg on the book ($15?).

  2. I found this article educational. Anyone find any issues with the logic/thought process?


    • Hi Tom,
      Thanks for opening that for discussion.

      I was going through the DNB 10k. It generates about $6 per share FCF, and a 15% discount rate implies a 40 no growth price. Growth appears uneven in the last 5 years, so with a 5% rough growth rate, that works out to 65 with no margin of safety (actually today’s market price). Take a chunk off that for MoS and you can see that Geoff has other criteria for the purchase. I haven’t gone into other methods of valuation, or looked deeper into the business, but I don’t think I would classify it as a franchise (maybe in the past) because its growth has been declining for the past 5 years, BUT they are able to run on negative working capital and there is very low capex (I added their software expenditure into the capex calculation).

      How does one calculate ROIC for businesses that have negative working capital and low net fixed assets? The denominator is negative.

      • Let me answer my question about the ROIC for businesses with negative working capital and low net fixed assets.

        In its 10k, Walmart provides a different way to calculate ROIC than JG’s way.

        Calculation of Return on Investment

        Operating income
        + interest income
        + depreciation and amortization
        + Rent
        = Adjusted operating income
        (this is where we would deduct MCX too)

        Divided by this:

        Average total assets of continuing operations
        + Average accumulated depreciation and amortization
        – Average accounts payable
        + Rent x8 (I don’t know why x8; need to look it up in the 10k; does anyone know why?)
        = Average invested capital

        For the details, go to the 2012 WMT 10k

        Tom: Sorry about diverging from your topic about the logic/thought process.

        • Kevin,

          Talk about whatever you want to talk about. The more discussion, the better. My guess regarding the 8x rent is that it is a rough way to capitalize rent expense (meaning that if you bough the property instead of renting it, the cost that would show up on your balance sheet would be roughly 8x the cost to rent the property).

  3. John , I didn’t mean to complain. I own the book. I was just pointing this out to anyone who was going to rely on the PDF. Thanks for everything!

  4. Dear Sid:

    Don’t worry about my abrupt style :). It is not meant as a rebuke. I wish I did have the full book in PDF form. Thanks for your heads up to readers.

  5. Something Gannon mentioned in his article regarding the use of free cash flow in determining value resonnated with me (ie. that it ignores the use of cash reinvested in high returning projects. Ultimately, these investments will yield cash, but if that doesn’t occur until many years out, then I would argue, the estimate of value becomes harder). Professor Penman suggest something similar about the use of DCF in this interview (about halfway through the interview):


    This is just something that makes sense to me. Although, I would love to hear another take on this. Just trying to get educated. Thanks.

  6. Thanks Tom.

  7. Great discussion. I will eventually discuss Accounting for Value by Penman once the slog through Comp. Demystified is through.

    • i have heard lot of praise about this book john …and great work with the blog ..thanks from all newbies !

      • hey john…i kinda figured out u have been advising the book yourself…

        whats the difference between the two books by pennman and i have finished financial statement analysis material of cfa, and now do u think i can handle penman’s book ?

        • One book is a text book and the other is for the general public.
          I will post the Student Guide for those interested in working through the text and pointing out the main points. You can do it, but you have to work digently through the problems.

  8. Great discussion on the JG article. First off, I wish JG would limit himself to 1500 words per article. I find them very scattered.

    In any case, doesn’t his article come down to the old debate of Cash Cow vs. Fast Grower? I like them both at the right price and the right management.

    Also, don’t we avoid the problem he is talking about by only deducting MCX to get FCF rather than total FCF? You then analyze the use of FCF including Capex for growth. As Tom (via Penman) points out, this can be difficult to analyze and why value investors stay away from start ups. I believe this is the point JG makes (via Buffett) about reliable/sustainable ROIC.

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