Cash on Cash Return
October 20th, 2023
To: Clients, Friends, & Family
From: Julien B. Booth
I hope this note finds you healthy and peaceful. I sure am grateful to live in the U.S.
Cash on cash return is a commonly used metric in the commercial real estate industry to measure the cash yield on a $dollar amount invested. Cash on cash return is also a wonderfully simple way to measure a real business without the broad adjustments (trickery) of modern accounting. I cherish simple cash-based accounting. It is a lot like cash yield in farming, timber or mining.
Goldmoney is very much representative of a simple-to-understand cash-on-cash business. The underlying company generates fee-based income through its Goldmoney.com business, Net-Net cash-flow from Goldmoney Properties, and equity return from its ownership of Mene.com. Please see the quarterly breakout below.
My direct experience building two operating companies very much parallels the structure and methods of Goldmoney. The GM directors/insiders, along with our invested equity capital, are creating measurable underlying economic value + perpetual cash flow. It is all a function of business diligence and time. Yield compounds on yield.
The past 15 years have witnessed a major diminishment of these CORE principles as many companies were funded in a 0% interest rate world. With the present cost of money now approx. 8%, we are witnessing a thinning of the 0% herd.
Nobody likes watching asset markets being this volatile; however, I do believe this process is absolutely necessary to be in a capitalist-driven system. My primary job is to protect capital and generate safe returns on your capital. Stock prices, and everything it seems, have little to do with underlying reality when viewed over a short duration. Cash yield is a tangible reality. I will always favor a simple-to-understand cash return on a business vs. trying to catch lightning (or crypto currency) in a bottle.
Thank you for your patience with Goldmoney. I believe the cash-on-cash returns prove the durability of this investment. (Reg FD – Goldmoney is my largest personal equity holding along with Berkshire Hathaway)
Thank you for your interest. Please advise questions.
Julien
jbooth@forestcapital
704-608-3100
Source: Investopedia