Tagged: Intrinsic value
- Stig Brodersen AdministratorJuly 5, 2018 at 8:28 amPost count: 224
I think it depends on which company you’re looking at. For BRK.B I think the book would suffice.
However, for the majority of the companies that you see in the S&P500 I suggest that you use the method from the intrinsic value course.
Book value growth is harder to measure when you add the dimension of share repurchase that is decreasing equity. Not in reality, but as an accounting procedure.
Price is what you pay. Value is what you get. - Warren BuffettStig Brodersen AdministratorJuly 5, 2018 at 8:32 amPost count: 224
It’s 3 different ways to value a stock. 🙂
Please also see my response to Antoine 🙂
Price is what you pay. Value is what you get. - Warren Buffettamitemail@example.com NewbieJuly 8, 2018 at 12:19 pmPost count: firstname.lastname@example.org NewbieJuly 8, 2018 at 10:04 pmPost count: 2
I was wondering why, in your historical testing of the TIP multiple, did you stop at the year 2011?
Besides that, thanks for the hard work you’ve put into all the content you produce. Some of the clearest explanations I’ve seen on the net.
-AlexStig Brodersen AdministratorJuly 10, 2018 at 9:41 amPost count: 224
At the time it was the data set we had available. There could be value in continue to test it up to more recent years, however, the overall performance should be similar (if we started from 1964), and it would be costly to do. We would like to update this though in any case.
Great points to bring up!
Price is what you pay. Value is what you get. - Warren Buffettnc10000@hotmail.com MemberJuly 18, 2018 at 12:15 amPost count: 10
I have a question.
My question is about the intrinsic value calculator in the intrinsic value course.
If you put a currency which is different to the US dollar, does this make the calculation inaccurate?
For example, if I want to calculate a US company with Chinese Currency, how do I go about this?
NeelTal K NewbieJuly 18, 2018 at 1:55 amPost count: 2
My question is in regards to the Intrinsic Value Assessment that you did for Apple.
I’m trying to better understand couple of things, the main one is:
“Assuming these potential outcomes and corresponding cash flows are accurately represented, Apple Inc. might be priced at a 7.4% annual return if the company can be purchased at today’s price.”
Based on the 3 scenarios that you’ve highlighted, I calculated the average growth rate, which came out to be 7%.
I then tried to calculate the intrinsic value of the company by using the DCF on FCF.
Using the latest FCF of 53.7B, and projecting it 10 years forward at the average expected growth rate, and discounting it back at 7.4%, i was expecting to end up with the current market price.
Since you didn’t say what growth rate you used to determine the terminal value, I used various numbers, but wasn’t able to come up with the same results as you did.
Will you mind giving more details about how you determined the price?
I will also appreciate if you can discuss this: “Furthermore, the company may return around 7% at the current price if the estimated free cash flows are achieved.”Nikhil Y NewbieJuly 18, 2018 at 5:04 amPost count: 4
Hello sir, i have a question about selling a stock. Its been said that one should sell his stock if fundamental reason of buying a stock changes. But in case of coca-cola, its intrinsic value is much below its current pice. Then why warren buffet is not selling it? For small investors like me.. if i dont sell stocks which passes its intrinsic value, then how can i earn from stocks?(as didvidend paymnets are not that high for small investor). Thank youStig Brodersen AdministratorJuly 18, 2018 at 10:44 amPost count: 224
You can use the sheet for any currency.
I’m gonna loop in @David on this one who I wrote the article with and who is also a moderator on the forum.
This would be because of the deferred tax, He made 10X or so on KO, and he would have to pay tax on that gain if he sold. The return he could get from finding a cheaper stock might not be there since he would invest the much lower proceeds after the sale.
Price is what you pay. Value is what you get. - Warren BuffettNikhil Y NewbieJuly 22, 2018 at 4:05 amPost count: 4
i have a question about perpetuity Growth rate, which is used in dcf model.
It is written in the book(warren buffett accounting book) that one should use 2-3% as perpetuity growth rate. i am little confused here. If we consider inflation which is about 5%(in india), then it means company growth is in negative (i.e. 3-5= -2%). shouldn’t the value of perpetuity growth rate be in between inflation rate of country and growth rate of that country? Thank you!Stig Brodersen AdministratorJuly 26, 2018 at 5:00 amPost count: 224
You can think about this as “real growth” for the economy. The perpetuity rate you use should be similar to that after your short-term growth rate.
If not it would eventually grow higher than India 🙂
Price is what you pay. Value is what you get. - Warren Buffettyassergol25@gmail.com NewbieJuly 31, 2018 at 10:59 amPost count: 1
Hi Stig, how are you? I already finished the intrinsic value course, and I have some questions. Google’s stock screener is not available, can you recommend me another one? How do I set up TIP Value Multiple into stock screener or is it the same value as P/E ratio? I feel overwhelmed, because I was waiting to see how to use a stock screener. What kind of metrics should I use? For example, P/E what range, ROE what range, Current ratio what range, PEG ratio what range, etc. I meant by range between what numbers is a good pick. For example P/E ratio between 1 and 8.
I’m a Finance student at Florida International University(FIU) and any professor has explained how to invest, but all books say you should invest. That’s why I’m buying your courses. I’m planning to take How to invest in ETFs. Do you have any discount for those who already paid previous courses? What else do you recommend me to succeed as Finance major? Thank for your dedication, thanks for your courses, and thanks for being there for us.
Have a great day.
Yasser Lopeznc10000@hotmail.com MemberAugust 1, 2018 at 10:23 pmPost count: 10
If the Internal Rate of Return of a stock is below 5%, does that mean it is overvalued?
Next question is, if the Internal Rate of Return of stock is higher than 10%, does that mean it is undervalued?
I went through the internal rate of return lecture in the Intrinsic Value Course.
In the intrinsic value course, Preston compares the IRR of Apple to the S&P 500 index. The S&P 500 index was priced around 3 to 3.5%. With share price of Apple at $100, the IRR was 8%. Because the 8% was higher than 3%, Preston’s conclusion was that stock was undervalued.
What happens if the opposite happens?
At the time of this writing, S&P 500 was priced at 12.17% annually and the IRR of Facebook was priced at 4.1% based on a stock price of $171.65.
Does that mean Facebook is overvalued because the S&P 500 is higher than the IRR of Facebook?
NeelStig Brodersen AdministratorAugust 2, 2018 at 3:24 amPost count: 224
Thanks for the support! We need that to be able to continue to provide free content for the community, so we really appreciate it! 🙂
I have not seen a pure TIP value multiple screeners (though it might exist out there), but we’re building our own that everyone that has the course will get free access to. We hope to launch it before too long. In the meantime, I think P/E is not a bad metric thought it has minor drawbacks that the value multiple does not.
For a finance major, I think the following must would be very helpful for you: https://www.theinvestorspodcast.com/top-10-books/
For the ETF course please me an email – I need to put you in contact with the person who can set it up for you.
Price is what you pay. Value is what you get. - Warren BuffettStig Brodersen AdministratorAugust 2, 2018 at 3:27 amPost count: 224
It depends on you really. I would say that the IRR should be at least 7% for you to consider it. But if you’re happy with 5% I won’t be the one to say you can’t invest in it. You just take on another type of risk than if you bought the entire index.
I would say that a stock that has 5% IRR though the market might give you say 3% could still be overvalued. It’s up to you to evaluate it. The key is to consider if you would like that return with the potential downside.
Price is what you pay. Value is what you get. - Warren Buffett
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