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Buckeye

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    Valuation Techniques Help Please

    in General Discussion

    Posted

     

    LC - Great tip on not trying to focus so much on the exacts of future cash flows, but concentrate more on past and current exacts and be general about future prospects.

     

     

    I'd recommend reading this speech: http://turnkeyanalyst.com/wp-content/uploads/2013/02/Williams-Trying_too_Hard.pdf

     

    Some of my key takeaways (and a humorous line):

     

    -Confidence in a forecast (or valuation) comes from the amount of information we put into it. However the accuracy of your forecast/valuation stays the same.

     

    -Respect the virtues of a simple investment thesis. Successful investments must have a simple thesis, by nature.

     

    -Complication is evidence of a poor thesis

     

     

    Now for the humorous line:

    "An investor without a forecast is like a fish without a bicycle"

     

    Hey LC-

     

    Nice find.  That talk is great.  I like the story of the 75 year old investment manager who had the best ten year returns and had never heard of Ben Graham!

     

    Have you ever read the two books that were mentioned in the talk? The Tao of Physics or Dancing Wu Li Masters?  That seems like some Charlie Munger titles to me:)

     

    Thanks for posting.

    Valuation Techniques Help Please

    in General Discussion

    Posted

    Wow!  Thank you all for taking the time to reply!

     

    JBird- I will be sure to read and reread those years annual reports.  I understand the theory of the discount rate it has always just seemed to me as producing a wide range of outcomes. 

     

    On a side note, I wonder if there is a certain years letter that is Buffett's favorite.  We have all heard him repeat over and over that chapters 8 and 12 (I believe) are the two most important chapters in the intelligent investor, I wish some one would ask him which is his favorite "chapter" of the Berkshire letters.

     

    LC - Great tip on not trying to focus so much on the exacts of future cash flows, but concentrate more on past and current exacts and be general about future prospects.

     

    LanceSanity- I will read your article tonight.  Thanks!

     

    Icarus - I just added that book to my wish list after reading a review from Jae at Old School Value.

     

    Vinod - You just reminded me that I have the book you mentioned.  After digging it out of a pile of books, it looks like I read the first chapter or two and some how it got put down and forgot about. 

     

    One of my issues is starting one book reading part of it, getting excited about and starting another book and then the next thing I know I have about 6 or 7 books I am "trying" to read.  Does anyone else do this?  Or is it just my attention deficit disorder kicking in?

     

    Packer - I guess I didn't realize that the multiples are as valuable as the are.  I always assumed that was too simplistic.  But now that I think about it, after reading through many of the old Graham writings he used these multiples quite often.  I remember and think about the most common multiples and gloss over some of these that may be more important.

     

    As part of this learning experience I am going to try to go back through some of my readings and make notes of the mentioned types of multiples.  After some of my further research I will list what I found and board members can weigh in on which ones they like or use the most.

     

    Thanks again all!!

     

     

     

     

     

    Valuation Techniques Help Please

    in General Discussion

    Posted

    This is the article that got me started on this topic:

     

    http://www.gurufocus.com/news/225351/how-to-practice-valuation

     

    He uses a similar company and its multiple of sales and its multiple of EBIT as a comparison and then averages that companies multiples and the one he is researching to find the applicable multiple.

     

    So, after reading this I noticed the same thing that ExpectedValue pointed out that you might just end up comparing one inflated value to another. 

     

    He also seems down on the the DCF model.  If I were to use a DCF what is the discount rate I should be using?  Is this a dumb question or is this the 1,000,000 dollar question?

     

    Thanks for your replies!

    Valuation Techniques Help Please

    in General Discussion

    Posted

    Jbird-

     

    Thanks! I am reading Max Olsens Compilation of Berkshire Letter and am on year 1982.  I will make a note to read those two years extra carefully.

     

    LC-

     

    When you say owners earnings are you referring to net cash flows?  Do you extrapolate that out into the future and the discount it back to present values?

     

     

     

    Valuation Techniques Help Please

    in General Discussion

    Posted

    Hello All-

     

    Would anyone care to recommend a book/article/publication that would help an investor learn and practice valuation techniques?  Also, what are the boards most favored techniques?  I know that the technique may depend on the type of security, but it would be much appreciated if members would list their favorite techniques, the strengths and weaknesses of those techniques and the most applicable circumstance for that type of technique.

     

    I realized that I spend most of my time (more like all of time) reading ideas and I need to start practicing valuations. 

     

    Thank you for any help.  I greatly appreciate your feedback and value your opinions.

     

    Buckeye

    George Clooney vs. Daniel Loeb

    in General Discussion

    Posted

    Forgive me if this has already been posted. 

     

    “[Loeb] calls himself an activist investor, and I would call him a carpet bagger, and one who is trying to spread a climate of fear that pushes studios to want to make only tent poles,” Clooney said. “Films like Michael Clayton, Out of Sight, Good Night, And Good Luck, The Descendants and O, Brother Where Art Though?, none of these are movies studios are inclined to make. What he’s doing is scaring studios and pushing them to make decisions from a place of fear. Why is he buying stock like crazy if he’s so down on things? He’s trying to manipulate the market.

     

    http://movies.yahoo.com/news/george-clooney-hedge-fund-honcho-daniel-loeb-stop-161611465.html

    Heads Up - Board Update Probably Tonight

    in General Discussion

    Posted

    Nice work Sanjeev.

     

    May I suggest a potential improvement? I'd like it if there were 20 posts per page instead of just 10. I feel like 10 posts per page visually breaks discussions up quite a bit.

     

    Of course there might be good reasons for 10 as well, faster load time, etc.

     

    Constructive-

     

    Choose Profile -> Summary -> then right above your board name is "modify profile -> look & layout -> messages to display per page -> choose 

    "Value Line" Like Publications by Country

    in General Discussion

    Posted

    Oddball-

     

    Thanks for the reply.  I do link print materials and I know Value Line has a good history of providing investors wit good information.  (I remember seeing an interview with Schloss where he mentions his copy of Value Line and starts throwing out interesting stock picks.

     

    Also, I am from Columbus, Ohio.  One of my best friends from college (OU in Athens) grew up in Bay Village.  He would have graduated high school around 1995.  Anywhere close to you?

     

    Buckeye

    I Worry About "The Shot Heard Around The World"

    in General Discussion

    Posted

    I have a question for the board regarding cash:

     

    Lets say one has 100% of their assets invested in BRK;

     

    BRK's market cap is ~ 270B and @50Bil of that (or ~ 20%) is held in cash by Warren.

     

    Would anyone look at this as "having" 20% in cash, with Mr. Buffett waiting to invest it for you?

     

    Can this act as a type of hedge?

     

    Thoughts?

    Chou profile in WSJ

    in General Discussion

    Posted

    Congrats to Mr Chou!  I was pretty proud to see him on the cover of the Marketplace section when I opened the paper this morning.  Good for him and thanks to Sanjeev and this board for exposing me to him and the other Canadian superstars!

    Why are you a liberal?

    in General Discussion

    Posted

    You should read "Why democrats and republicans are bankrupting our nation," or something to that effect, by Peter Peterson. It's a great unbiased read on the situation and will leave you equally hating both parties, and probably more in the camp with Liberty.  :)

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