Income or Assets

Which one is more important, assets or income? For most mature companies, it is no question that assets is more important. Net income can change quickly and easily manipulated. Assets are more stable and difficult to be manipulated. Inside assets, pay attention to the quality. Cash is always the best. Inventory does not count much for high tech companies but worth a lot for commodity companies. Brand is very important for a small number companies like Coke-cola but woth almost nothing a vast majority compoanies. Loan quality is the most important factor for analyzing financial companies.

If you can buy a company below its replacement value, it is a bargan. I always like to buy an index below its replacement value. For S&P 500, the replacement value is 770.