Author Topic: How do you measure value?  (Read 16497 times)

Green King

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Re: How do you measure value?
« Reply #40 on: June 21, 2012, 03:23:34 PM »
I thought the reason he would by by more is one because he owns a lot of it he would be over weighting and the other being he can get better compounding buying businesses out right since the money can go to brk daily for reallocation. Also of cheaper things are out there but I am not vey sure about it I have not look at all of them yet.
GK


ExpectedValue

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Re: How do you measure value?
« Reply #41 on: June 21, 2012, 05:59:28 PM »
Good succinct post Martian.

I have been guilty of using DCF too much.

Very helpful thread.

Thanks everyone for sharing some very important information.

I think it's important to be really really careful about making a distinction here.

DCF is not bad, it's a sound way to think about valuing a company.

The bad thing is when people relax and massage the inputs that go into the DCF to make excuses for buying inferior or expensive companies. That's where you abuse discounted cash flow analysis.

You want to be really conservative and assume a real discount rate and be very conservative about your growth rate to come up with a valuation. And then obtain a margin of safety on top of that.


Rabbitisrich

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Re: How do you measure value?
« Reply #42 on: June 21, 2012, 08:00:23 PM »
Any valuation multiple is just one side of various DCF equations.

mcliu

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Re: How do you measure value?
« Reply #43 on: June 22, 2012, 11:59:15 AM »
DCFs are inherently sound if you can correctly estimate the cash flow and you have an appropriate discount rate.

I think the problem is using the CAPM as a basis for determining the discount rate.


WarrenWatsa

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Re: How do you measure value?
« Reply #44 on: June 22, 2012, 02:44:13 PM »
Regarding discount rate for DCF, almost everyone uses 8-10%. Some use CAPM to justify, others just say “that’s my required return and I won’t invest if it doesn’t meet that hurdle.

petec

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Re: How do you measure value?
« Reply #45 on: June 26, 2012, 01:47:58 AM »

I think it's important to be really really careful about making a distinction here.

DCF is not bad, it's a sound way to think about valuing a company.

The bad thing is when people relax and massage the inputs that go into the DCF to make excuses for buying inferior or expensive companies. That's where you abuse discounted cash flow analysis.



+1

Actually, + about 10!
FFH MSFT BRK BAM SSW LNG IHG TFG CGT DC/A

anders

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Re: How do you measure value?
« Reply #46 on: June 26, 2012, 12:47:37 PM »
I dont think conventional metrics such as p/e, p/b give you that much in terms of valuation. These nrs only tell you what has been put into the company, while value derives from what can be taken out.

The law of valuation of any asset, whether its farmland, oil in the ground, a new technology, real estate, is and will always be; the future cash produced from present until kingdom come, discounted at an appropriate discount rate.

Ive stopped using DCF since I believe the model is flawed. And last, you can never adjust the discount rate to protect against risk. The risk lies in the probability of losing purchasing power over the contemplated holding period.

My two cents,