Using Free Cash Flow Yield, Lynch- and Berkowitz-Style

In his latest article, Validea CEO John Reese takes a look at stocks that might interest two of history’s top investors, Peter Lynch and Bruce Berkowitz.

Reese notes that Berkowitz — Morningstar’s domestic fund manager of the decade — focuses his analysis on “free cash flow yield”. Free cash flow is essentially the cash that a firm can use to grow its business, pay dividends or pay off debt — all of which are critical factors for investors, Reese notes. Free cash flow yield is thus free cash per share divided by share price. Berkowitz has said he likes to see free cash flow yields of 10% or more.

Reese examines a handful of stocks that have free cash flow yields around 10% or more and also get approval from one of his Guru Strategies, each of which is based on the published approach of a different investing great. He finds that his Peter Lynch-based approach is particularly high on some big free-cash-flow-yielding firms. To read the full article, click here.

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