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Dazza
22-03-2005, 09:59 PM
sorry if theres already a thread, if there is could someone url it for me thanks.

INTRINSIC VALUE

anwyays just reading the warren buffett way 2nd edition, and i came across Graham's 2 step simple rule thingie:

1. calculate the net asset of a co. and times by 2/3, if market price is below then buy.

2. low P/E retios.


its point 1 that i am finding hards to grip with..

when he says net asset, does he mean just buy total net assets?
theres a sentence along the lines, where he minus's total liablilities, and uses the residual values.

give u guys an example, we will take SKC:

total assets : 1424 mill
total liabilites: 1236 mill
# of shares: 417 mill


so :

1. do we take the total assets, times by 2/3 then divide by # of shares to get an intrinsic value?

or

2. take total assets - total liablilites and THEN times by 2/3 devide by # of shares to get intrinsic value?

stephen
22-03-2005, 11:36 PM
"Net" = "net of liabilities". In your example, SKC would have a net asset value per share of only 45 cents! SKC at 30c per share would indeed be a bargain, but it'll never happen.

Graham was more targetting industrial firms with plant, property and inventories that had realisable value. Some other companies are still fine cash generators with almost no net assets, like, I dunno, Telecom. And SKC. In the case of such companies, you want to be looking at cashflow, not assets, as a yardstick of value. Not coincidentally, companies like Telecom and SKC have almost monopoly-like properties, not on the books, that let them use their paltry book assets to great advantage - the local line loop and casino licenses respectively.

Even looking at the industrials etc that Graham had in mind, you have to adjust for the times, I'm afraid. Few if any shares will be selling below net asset value at the moment, and if they are, there is likely a very good reason (is it TTP that has a majority overseas shareholder who's trying to drive the others out?)

thereslifeafter87
23-03-2005, 11:46 AM
UOS.ax is another good example.

Trading at less than 2/3 NTA.

Westie
23-03-2005, 12:02 PM
If you are interested in valuing a company like SKC from a value investing standpoint, then another book you may wish to consider is Value Investing & Beyond by by Bruce Greenwald (Greenwald is the Robert Heilbrun Professor of Economics at Columbia University Business School, Ben Graham's old stomping ground). He expands on the Graham, Buffett value styles by kind of synthesising them together. He gives a method for getting the asset value of the company, and then goes on to value a company's earnings power (or franchise value a la warren buffett) and then the value of growth. With SKC, as Stephen has pointed out, their earnings are due to intangible assets such as its monopoly position in NZ. The franchise value method will give a more accurate picture of the company in this case. Look up the book on Amazon.

There are some co's still selling below nta in australasia (although not as low as 2/3rds) that have better than average prospects, in NZ you have ten, air, chp, evf, twr(?) to name a few. I think all these will perform well over the next 12-24 months (ttp is interesting, there will be some movement in the next 6 months on pure speculation as the major shareholder will again make a takeover offer but at what price who knows).

In australia you have
avj (close to NTA and has earned 20% returns over the last 10-15yrs, pe of 5, & yeild of 5% which isn't being cut, def contrarian buy!) ane, nam, ghg, aeo, ogd, lcp, hic to name a few more interesting ones. The last two are value investing funds that are now sitting on 30% or so cash because of the high valuations on the ASX.

I must admit the above are all on my list to scrutinize more closely but i haven't gotten around to it yet. Do be careful though, as Stephen has said, there is often a good reason, Henry Walker Elton (bankrupt)is a case in point. However, do keep an eye on the new company that the administrators are looking at raising from HWE, if it happens new co will have good points.......no debt, lots of sellers (former debt holders with new equity they don't want), just the best bits of the old business.

duncan macgregor
23-03-2005, 02:21 PM
DAZZA,I think you need to differenciate where you stand and warren regarding investment decisions. It is pointless working out what a company is worth more to the point is what your partners think it is worth. Warren works it out, and buys the company,and controls it. You and i buy shares in a company there lies the difference. The people that are shareholders let you know by the day what it is worth, your opinion is only a small part of that process. Working out what your fellow shareholders think is more productive than working out the companies worth. If you place your own personal opinion above your fellow shareholders opinion you tread on dangerous ground. WARREN BUYS COMPANIES YOU AND I INVEST IN COMPANIES . macdunk

Dazza
23-03-2005, 02:40 PM
agreed, i continued reading a bit more
and warren says that grahem's theory is old... hense he combined it with i tink fishers ideology

thanks for the tips guys, will continue to ask more questions in future :D

*duncan, if u dun mind could u answer my question in SKC's thread about EQUITY thanks :D*

duncan macgregor
23-03-2005, 02:54 PM
DAZZA, Sorry i havent done the homework so wont comment. macdunk

Winston001
23-03-2005, 03:10 PM
quote:Originally posted by duncan macgregor

DAZZA,I think you need to differenciate where you stand and warren regarding investment decisions. It is pointless working out what a company is worth more to the point is what your partners think it is worth. Warren works it out, and buys the company,and controls it. You and i buy shares in a company there lies the difference.

With respect Mac, this isn't always true. In his early days, Buffet didn't have the cash to get control. Also, he simply buys stocks in companies he perceives as undervalued. His judgement is just a bit better than everyone else.

Buffett often uses arbitraging, which doesn't require owning control. He also uses FA and TA eg. seeing a return of capital, he calculates the market strength of the stock, and if his figures suggest the new price (after payout) will move above its theoretical value, then he buys. A punt but I think it would have worked with CAV and a few others in recent years.

Dividend stripping can work the same way. The ex-div price quite often recovers close to the come-div price in a short time.


quote: The people that are shareholders let you know by the day what it is worth, your opinion is only a small part of that process. Working out what your fellow shareholders think is more productive than working out the companies worth. If you place your own personal opinion above your fellow shareholders opinion you tread on dangerous ground. WARREN BUYS COMPANIES YOU AND I INVEST IN COMPANIES . macdunk


Fine except this means the market is correct at every moment. And you'd never buy or sell because the next moment a change would occur which would be the new correct position.

The market is chaotic - for every seller with reasons, there is a buyer with other reasons. It is driven hourly by emotion, rumour, and news. No matter what anyone says, there is no predicting the market. So we are each left to make best guesses, which can be backed up by FA or TA or whatever style you like.

duncan macgregor
23-03-2005, 03:58 PM
WINSTON001, Everything you say is correct, with a very big but.
Warren now plays out of our league, what happened then and what happens now against what you and i get up to is more to the point.
Pointless looking at warren with the excepttion of following the snail trail and his successfull policy. He has the handicap of being oversize, which means to buy and sell equates to a major share price movement. You and i can sneak in and sneak out unnoticed. Why follow what warren does when we dont have his handicap. We also dont have his priviledges, we or should i say you and i are in a different market to warren. It is more important to warren the worth of a share where you and i it is more important the investor perspective of worth. macdunk

Westie
23-03-2005, 04:33 PM
quote:Warren works it out, and buys the company,and controls it. You and i buy shares in a company there lies the difference.

That is incorrect. While Buffett does buy whole companies for Berkshire, he also purchases shareholdings in companies. He does not own all of Gillette, Coke, Washington Post etc.

If you hunt around you'll also find an old post of mine on here with an article about what Buffett buys for his own personal portfolio. Interestingly enough, many of them are Ben Graham style "cigar butts". So while his style of investing has changed for Berkshire, (dictated by the ever growing mountain of money the company owns) his personal choices with small(er) amounts of $ haven't changed all that much from his days when he was running his investment partnership.


quote:The people that are shareholders let you know by the day what it is worth, your opinion is only a small part of that process. Working out what your fellow shareholders think is more productive than working out the companies worth.

You'll also find this opinion at odds with Buffett & Graham's philosophies. MacDunk confuses price with value. As per Buffett "price is what you pay, value is what you get". Logically, if you think about what MacDunk is saying, Buffett nor anyone else should ever purchase a non-listed company as it is worthless (after all, there are no "fellow shareholders" to let you know what it is "worth" just you, and how can you know what it is worth without them?). However, if non-listed co's have a value without a stock ticker, then surely so too must listed companies, independent of their stock ticker.

So the correct way to value a business then? Private or public, value is the free cashflow that is generated by the biz over its lifetime, discounted to the present. Buffett has said this much. That is what the book buffettology is about.
On this basis, at times, the market will irrationally price a business. There is no need for your "opinion" and "treading on dangerous ground" in determining the market is right or wrong, just analyze the hard data. To steal another quote:
"You are neither right nor wrong because others agree with you, you are right because your facts are right and your reasoning is right, nothing else makes you right" Ben Graham

At the heart of buffett's investing style is ben graham's saying "investing is most rational when it is most businesslike". No one sells a private business simply because someone walked past and yelled out that they'd buy it for a low price. The value of a business is worth either its assets at liquidation value or the cash that it makes over its lifetime. Period. The stock market is simply there to let you know if someone will offer you a bargain today.

kittydashwood
23-03-2005, 06:17 PM
REcently bought COMCAST... media is where they all want yo be because that grooms the consumer.

duncan macgregor
23-03-2005, 07:09 PM
WESTIE, This is a little like religeon. When you get to involved and brainwashed you start to make stupid decisions. Instead of following something in blind faith stop and think it out in a rational manner. There are hundreds of religeons, as there is investment styles, so when i hear of someone blindly following i know they have stopped thinking. I studied warren buffet methods, plus technical analysis, and designed my own systems, but to blindly follow is not on with anything in life, religeon, politics, or investment style.

rmbbrave
23-03-2005, 07:39 PM
quote:Originally posted by duncan macgregor

WESTIE, This is a little like religeon. When you get to involved and brainwashed you start to make stupid decisions. Instead of following something in blind faith stop and think it out in a rational manner. There are hundreds of religeons, as there is investment styles, so when i hear of someone blindly following i know they have stopped thinking. I studied warren buffet methods, plus technical analysis, and designed my own systems, but to blindly follow is not on with anything in life, religeon, politics, or investment style.


What about cricket, Duncan? It's okay to blindly follow that mate.

skinny
23-03-2005, 10:52 PM
I like to puff the occasional cigar butt myself, and unlike some choices I've made with speccy "growth" stocks its yet to see me wrong. The main thing to worry about IMO is getting stuck in a situation where the share price just sits there, a so-called "value trap", which really matters from an opportunity cost perspective in a bullish market! I reckon you can mitigate the value trap risk though by sticking to stocks trading below NTA that you also expect earnings to rise going forward. In which case you get a double whammy from the earnings side and correction back to NTA. Some concrete examples of stocks I've profited from in this category downunder include: RPL (bought around 37c when NTA ~60c, +100% gain so far), CDL (bought @42c when NTA ~60c, 40% gain) and AIX.AX (bought @1.60 when NTA ~2.00, 60% gain).

Most recent purchase in this category is EDV.TO, a specialised merchant bank that lends to junior miners gearing up production (mainly goldies) in exchange for equity, convertible warrants and debt. This company has doubled its NTA per share since listing 3 years ago, has *no* debt, trades on a historical p/e of 10 and a fwd p/e of maybe under 5 and has just started paying a dividend. Current NTA is CAN $5.06 and trades at $3.70 odd, around 35% below NTA. So far have made 10% on it since buying 6 weeks ago and it commands about 15% of the portfolio ;)

Westie
24-03-2005, 10:02 AM
quote:This is a little like religeon.....Instead of following something in blind faith stop and think it out in a rational manner

MacDunk, Dazza appears to be trying to educate himself, good on him. I just pointed out that if he is educating himself on Buffett, then you're take on Buffett's strategy is incorrect, and your logic on the market is flawed. The facts are there, the logic is there, argue off them, don't shoot the messenger. That is a "rational manner" is it not?


quote:There are hundreds of religeons, as there is investment styles

Yes, but who believes that all investing styles are equal simply by virtue of there being many?


quote:so when i hear of someone blindly following i know they have stopped thinking
So how do you determine who is blindly following? That they disagree with you MacDunk? I wouldn't presume that someone who follows a certain investing style is a "blind follower" simply because they have adopted the style. There is a saying, "if it ain't broke, don't fix it". If you analyse it and find there is nothing wrong with it, why change it?


quote:I studied warren buffet methods, plus technical analysis, and designed my own systems,

Neither would I assume that someone is somehow intelligent because they have have taken part of one style and meshed it with part of another. You really need to analyse their logic, reasoning, and track record. THat is what makes them smart or intelligent.


quote:but to blindly follow is not on with anything in life, religeon, politics, or investment style

I agree wholeheartedly with you on this one MacDunk. But discernment is crucial, in any group of humans there will be blind followers, there will be educated followers, and there will be those that understand it but don't necessarily agree with all of it, or even follow it.

I understand buffett, i agree with his logic, but i don't use his methods exclusively or even most of the time. There are many different styles of value investing that all share the same underlying philosophy, all with records just as good as Buffett's. I choose my value investing tool to suit the situation. I've also studied TA but don't use it very much.

Westie
24-03-2005, 11:49 AM
I thought i should also apologize for the large letter typing of the quote by ben graham in my post above, it looks a bit rude. I was actually trying to adjust the font size to be smaller but achieved the exact opposite. [B)]

Just to add to the discussion, I was just reading the latest shareholder letter of a large US value fund that specializes in purchasing companies at "discounts to readily ascertainable net asset values". In Jan this year they were buying BIL & adding to most of their NZ positions which include RBC, TEL, & TRH. They had this to say:


quote:BIL International Ltd. (“BIL”) is a Singapore-listed
company with a disparate collection of assets and
businesses. The single most important of these is Thistle
Hotels, one of the largest chains in the UK and London’s
biggest hotel group. BIL has been gradually moving
forward on its strategy to realize the value of its real estate
holdings, by selling the underlying real estate while
retaining hotel management contracts. The second
largest asset held by the company is 40% of the island of
Molokai, Hawaii. Previous owners of Molokai have
struggled to develop the property, with limited success.
BIL is expected to present a new master plan, developed
in cooperation with the Conservation Fund, to the
County of Maui and the local community of Molokai
later this year. This plan envisions the creation of a sizable
land trust to serve as a nature and historical site reserve,
with a limited amount of land being earmarked for
development. The third significant asset held by BIL is a
share in the royalty stream from all revenues from oil and
gas production in the Bass Strait between Australia and
Tasmania. The disparate and “hard-to-value” nature of
these assets presented us with the opportunity to
purchase these shares at a discount to our estimate of
their net asset value (“NAV”).


and

quote:The transformation continues apace at Rubicon Ltd.
(“Rubicon”), the New Zealand-based company with a
controlling interest in Tenon Ltd. (“Tenon,” previously
known as Fletcher Challenge Forests Ltd.) Following the
sale of its plantation forests at an attractive valuation,
Tenon recently realized the value of one of its two lumber
processing units, and has made a significant return of
capital distribution to its shareholders, amongst which is
Rubicon. This leaves it with another such processing unit
and ownership interests in two profitable US-based
building products distribution companies. These residual
assets are, in our view, separate, salable entities, whose
values we suspect will be realized at some point in the
future.


Disc: hold RBC & TEN

Dazza
25-03-2005, 10:04 AM
new findings:
SHARE BUY BACKS

seems that these are sound management skillz, if the co. has plenty of cash.

could someone tell me which co. recently do buybacks?

i think SKC did one did they?!
not many blue chips in nzl do them eh?

reading HQP, they did one in 2003 :D

any other co?

Winston001
25-03-2005, 07:39 PM
I must say that I've never figured this one out. The company could just do a capital return instead. Perhaps it is a cheaper way. The reason usually given is that the share is undervalued so the best investment the company can make is to buy its own shares.

Against this, analysts say that the management is mediocre because they cannot employ the funds to grow the business.

Hard to know. Lumps of cash can be tempting to spend for directors with dreams of merger and acquisition. So a board which returns money to shareholders (buying the share or capital return) could be regarded as highly competant and exercising good governance.

Dazza
26-03-2005, 07:28 AM
1. if they use the funds to grow a business... and doesnt even break even... = really bad... then id rather they give the funds back to shareholders.

2. normal dividends.

3. M&A - usually its bad when they buy businesses that are not part of their core ideology, eg u buy an orance co. when ur an apple co. similar but not same management mite get it wrong.

3B. M&A - usually pay these days for more than they are ie overprice... *FBU has good management IMO... buying that new stuff those few months ago.


well thats what warren says....

hense i wanted to know who is doing share buy backs

i remmeber CEN has heaps of dosh....

shasta
26-03-2005, 02:29 PM
Dazza,

Infratil also buy there shares back from time to time.

For my mind i like companies that use there surplus cash as follows:

1. To grow by acquisition

2. To further reduce debt

3. Buy back its own stock

4. Then finally pay out cash dividends(with DRP's)or bonus issues - as GPG do.

Basically anything that adds to its EPS, & reduces the P/E ratio.

winner69
26-03-2005, 08:19 PM
Good reason given why company buy back shares but one reason overlooked - SKC latest share buy back is to get their hands on some shares so they pay out incentives to employees and when the execs exercise options.

Saves them issuing new shares ... with a dilution impact ... which would upset you dazza

Mr_Market
27-03-2005, 03:23 PM
Winston. Shares bought back can be used as payment for future acqisitions i.e. Assuming the buyback occurs while your shares are undervalued, you have purchased your currency at at discount.

Dazza
27-03-2005, 09:51 PM
lesson for the day BONDS!
reading grahams intelligent investor

says that bonds should be min of 25% or max of 75%of the whole portfolio.

now ive neva come to grips with bonds and understanding them.

heres my understanding,
ok say today bonds stand at 9% pa.
say i brought government bonds or trustpower ones at 9%...
so ill get that return but its taxed... so its about what ~7% net?

now say 5 years later, interest rates plummet to 4% levels.... that means bonds selling then would be say what 5%?

so alot of ppl would want to buy my bonds which had a 9% interest pa with them... that means that would push up my bonds price, in which i can sell them for a capital gain?


correct peeps?!

*would like to know more about bonds if someone would have hte time to type it up in here :D

Westie
28-03-2005, 03:12 PM
quote:The company could just do a capital return instead. Perhaps it is a cheaper way.

Should be more tax efficient then a capital return. Per share earnings will rise and, theoretically, so should sp if company is to maintain its pe ratio.


quote:The reason usually given is that the share is undervalued so the best investment the company can make is to buy its own shares.
Against this, analysts say that the management is mediocre because they cannot employ the funds to grow the business.


IMHO the merits of the buyback are dictated by the situation. So either argument could be right. Some companies engage buybacks simply to enrich the majority shareholder at the expense of the minority holders (i.e. boardroom pressure). In all situations, you need to ask what the returns are from alternative uses of the funds vs the incremental returns from the buyback.

I've been buying shares in Peptech (ptd:asx), an aussie biotech. I was alerted to them because there were articles out criticising them for announcing a share buyback. Analysts say that the management is "out of ideas" and that the funds would be better used to "consolidate the industry" as peptech are now in a position to do so. I took a look at the company and have decided that the management team have made a very wise move and that there are unlikely to be any other biotechs in the industry with better economics and financial position and selling cheaper then PTD. Acqusitions for the sake of "consolidating" an industry where most companies are burning cash and profitable companies sell at an average PE of 17x don't make sense to me. Of course, time will tell whether the management or the analysts are right.

Westie
28-03-2005, 05:07 PM
quote:so alot of ppl would want to buy my bonds which had a 9% interest pa with them... that means that would push up my bonds price, in which i can sell them for a capital gain?

correct peeps?!
Ok, you asked for it:)
In essense yes, you are correct. The actual value of the bond is determined by the present value of the two cash flow streams (i.e. the coupons and face value at maturity). The yield used in determining the present value is the current market rate for the particular security (in this case a bond with a comparable rating). The two present value calculations are:
Present value of face value: P=face value (1 + i)^-n
plus
present value of coupon stream
P= C[1-(1+ i)^-n/i]
where i = current interest rate for period expressed as decimal
n= number of periods in which cash flow occurs
c= periodic coupon amount
(the ^ indicates an exponent or "to the power of")

So, if current treasury bond yields = 8% and you own an existing treasury bond with a face value of $100,000, paying 10% per annum half yearly coupons and exactly 6 years to maturity, the calculations would be

present value of face value:
P=$100,000(1+.04)^-12
P=62459.70

plus

present value of coupon stream
p=$5000 [1-(1+.04)^-12/.04]
p=$46925.37
Value of the bond is 62459.70 + 46925.37 = 109385.07
THe bond sells at a premium to face value as market interest rates are 8%, below your bond coupon of 10%

(remember in the calculations above the coupon is half yearly, therefore periods and interest rates are divided by 2, i.e. the number of periods is 12 not 6 and the interest rate is .04 not .08)

But present value calculations are only part of bond valuation. A bond is only as good as the company's ability to pay you the coupon and face value at maturity. There are a bunch of ratios that are given in most stage one finance textbooks that give a quantitative indicator of the company's financial health (as well as official credit ratings agencies). The other considerations are the seniority of the bond in the scheme of the company's financing (i.e. 1st ranking, 2nd ranking, secured, unsecured) and cructially, the guarantees attaching to the issue. The higher the seniority, the closer to the front of the line you stand when determining who gets paid what. This is all important when purchasing the debt of troubled companies, and indeed, companies in receivership. The guarantees are in the fine print of the issue and cover things like clauses to protect your ranking (i.e. can they create more debt of the same or higher ranking? etc), and what will happen in the event of a default on coupon payment (i.e. does the coupon accrue? does the bond convert to equity? etc). TWR had 8-9% subordinated debentures(?) that reached 15% a couple of years back when the company was in trouble. I checked the covenants and found that failure to make coupon payments would result in the securities converting to common stock. ALthough i didn't have the $ at the time, i thought this was a good deal as first, i figured things would have to get really bad for TWR not to pay the coupon (i.e. they'd pull out all the stops to ensure payment) due to the loss of reputation and status in NZ if they defaulted, and second i thought that the shares had significant appreciation potential if they did convert. Obviously this was one that got away as the debentures are now back around 8% and no payments were missed. On the other hand, there is a thread here with someone asking about 13% notes in a virtually unheard of nz finance company. This to me is extremely risky and at 13% the investor is not fully compensated for the risk he is taking.

at any rate, I don't know much about bonds so someone else may be able to offer much better info and critique my post, but i found the 1940 and 1962 editions of Security Analysis by Ben Graham to be good starting points (although they may

Dazza
04-04-2005, 04:05 PM
looking at KFL - kingfish limited

would it be fair to say that its a good time to buy now, with a very strong margin of safety,

reason:

NTA = 1.209 or something

SP = 1.04 or osmething

wouldnt that be a 25 cent margin of safety?

NTA , means how much would one get if it was liquited at bookvalue? or something right?

T assets - T liablities = NTA?

*grins mischievly , as i tink to buy KFL apply for DRIP and throw them in the draw till i graduate

duncan macgregor
04-04-2005, 04:43 PM
DAZZA, The only thing that counts in a share is the news in the pipeline nothing else. Good news coming up if you know about it before the herd BUY. Bad news coming up sell regardless of the herd. Always have a stop loss set at a predetermined figure. Always buy on an uptrend never on a downtrend. YOU will make at least one mistake in five, emotions keep out of your decisions and be decisive. Pe means very little compared to prospects..

Westie
05-04-2005, 11:47 AM
quote: What does "trading at at discount" mean?
It is common for listed investment companies such as Kingfish to have a share price that is different to the Net Asset Value (NAV) per share. Where the share price is lower than the NAV per share, the shares are said to be trading at a discount. Where the share price is higher than the NAV per share, the shares are trading at a premium. There can be many reasons for the shares trading at a value different to the underlying NAV including expectations of future earnings and market sentiment from time to time.

What does the "diluted NAV" mean?
The options (or warrants as they are also called) provide option holders with an opportunity to buy shares at a price of $1 on either 31 March 2006, 31 March 2007 or 31 March 2008. Option holders will probably only exercise their right to buy shares at $1 if the share price is at, or above $1.

As a result the options will have a dilutionary effect on the share price. As an example, if on 31 March 2006 the share price was $2 and everyone exercised their options (paying $1), the average share price will come down (be diluted). Immediately prior to the exercise of the options there will be 58.5 million shares on issue and the market capitalisation (worth) of the company will be $117 m (58.5m * $2). Once the options are exercised, the market cap will be $175.5m ($117m + $58.5m new money from the options) and there will be 117 million shares on issue. That would imply the share price should be $1.50 ($175.5m / 58.5m shares). Market sentiment might mean its different to that in reality.

To make this clear to shareholders we publish a weekly net asset value and a diluted net asset value to show the impact. If the share price is below $1 we assume that option holders would not exercise their right to pay $1 for each share and the diluted NAV will be the same as the undiluted NAV.

Diluted NAV
1.1448 (04/05/05)


FYI Dazza, above taken directly from kingfish's website. Be aware of the diluted NTA & the norm for these vehicles to trade below NTA. If it is NTA you are interested in, check how the NTA was arrived at. Assuming this is made up of the shareprice of their investments at balance date, how have these shareprices changed since? How are their investments fairing? Perhaps this NTA doesn't reflect the current market value of their holdings. Would this further reduce NTA & your margin of safety?

Investigate what they hold in their portfolio and how those companies are performing. Like MacDunk said, what's in the pipeline for these co's? Might not be as attractive as first glance suggests. Don't really know as i haven't investigated. Might have a look tonight. Just some thoughts.

Dazza
06-04-2005, 09:55 PM
Intrinsic value
the books mention this a lot *skimmed thru 2 books will make notes on them later on *

but could someone tell me what it exactly means? and how is it calculated?



OWNERS EARNINGS
those that have read and know warren, he uses owners earnings instead
that is net profit + amortilisation + depreciation - capital expenditures.

now does he calculate it just for one year?

and then does his 2 stage divided discount model?

im trying to do this, kinda getting the hang of it, BUT i want to find older data on NZX stocks..

does anyone know where i can find that?
ie going back say 10, 20, 30 years?

Westie
07-04-2005, 08:26 AM
quote:Intrinsic value
the books mention this a lot *skimmed thru 2 books will make notes on them later on *
but could someone tell me what it exactly means? and how is it calculated?


Definitions of intrinsic value vary, but a rough and ready one might be
Intrinsic value = economic worth of an asset (as opposed to market price or book value).

As intrinsic value is a perception of worth, the way it is calculated will depend on the calculatee (if there is such a word). You need to come to your own conclusions on that one. Buffett's method is one.


quote:OWNERS EARNINGS
those that have read and know warren, he uses owners earnings instead
that is net profit + amortilisation + depreciation - capital expenditures.
now does he calculate it just for one year?


From what i gather, he uses data from numerous years to get an average, as owner earnings (like everything else) can fluctuate with the business cycle. Buffett does however prefer co's with extremely stable earnings, that way you can be sure that your projections will more likely approximate the future. After all, your model is only as good as its assumptions.

Actually i think i read Charlie Munger say he'd never seen Buffett do a discounted cashflow valuation. Value should scream out at you before you even pick up a calculator. As you spend more time reading annual reports & watching co's you'll be better able to tell screaming bargains much more easily.


quote:i want to find older data on NZX stocks. does anyone know where i can find that?
ie going back say 10, 20, 30 years?


If you are an Auckland Uni student when i was there a few years back they had access in the library to IRG's database of annual reports which went back to the early - mid 90s. The other place that comes to mind is the AUckland public library, they have annual reports going back over 10 years. You have to endure them calling them up from storage though & people looking at you like "why the hell do you want that?"

Dazza
08-04-2005, 04:44 PM
ahhaha yes i am at AU, although mostly at the grafton campus

westie did u do a bcom at AU?

IRG database eh, sweet man thanks

Dazza
08-04-2005, 04:50 PM
CHRRRIKIE DICK!!
auckland uni is da shizzle!!! w00t w00t IRG is da **** man! are there any other databases that i have access too :D muahhahaha

Westie
10-04-2005, 10:15 PM
quote:westie did u do a bcom at AU?

No, wish i did though. I've got an MA in behavioral psychology with a double major in management at the undergrad level. Completely useless degree really. Taught me about scientific enquiry and logic and thats about it. I taught myself about finance, financial statement analysis, property investment etc while I was supposed to be writing my thesis :) I now work in a business consultancy/accounting firm!

What are you doing at the Grafton campus? medicine, science? Is the interest in investing a hobby or tied into your formal studies?

Dazza
11-04-2005, 03:39 PM
pharmacy there mate, investments are just hobby really loving this, i can see my self when some kid/student interviews me on what i did during my studies ... *erhhh while the other pharmacy students were studying, i was looking thru my investments/trades8 :D

beats studying i say any day :D

trackers
12-04-2005, 07:41 PM
aff bought back my shares i purchased at 41c for a 1/15 at 55c. not 2 bad i feel