Value Investing In Your Car Episode 18 – Why Goodwill Is Useless

In these Value Investing In Your Car Episodes, we talk about mental models: when does value investing work best, where it works, you get book reviews, the most important thing I learned in 2017, how to learn faster, useless investing metrics, and much more…

If you want to learn from the other episodes in this series you can watch the entire playlist here.

In this week’s video, we continue a mini-series, within this larger series, about the four most useless value investing and financial metrics and terms.

Here I detailed why P/E is useless.

And here is where I detailed why beta is useless.

Today I continue this series and tell you why 99.9% of the time goodwill is useless.

Let’s get to it…

In the 14 – minute video above, I detailed the following reasons why like P/E and beta, goodwill is almost completely useless.

• Why it’s useless 99.9% of the time
• The 0.1% of the time it isn’t useless and why it’s so rare to find useful goodwill
• What goodwill comes from
• Why almost 100% of the time I write 100% of this value off the balance sheet when I’m evaluating a company
• How it can negatively affect a company’s balance sheet, valuation, etc.
• And more…

What are your thoughts on goodwill? Do you rely on it in your evaluations? Do you think more highly of it than I do? Let me know in the comments below.

For more in-depth info on goodwill go here to read the 1983 Berkshire Hathaway shareholder letter. I recommend you read the full letter but if you only want to learn about goodwill, that section is near the bottom of the letter.

P.S. If you’d like to learn how to value and evaluate businesses like a world-class investor, check out our three programs that can help you do this…

Our Value Investing Training Vault, our Value Investing Masterclass, and our $10,000 Coaching Program.

P.P.S. I’m giving away FREE copies of my acclaimed value investing education book, How To Value Invest. To get your free copy, go here.