Jeff,
The questions you raise of course need whole books for response(Graham's mission in Security Analysis was to answer questions like the ones you raised), but some quick comments on intrinsic value:
- The value of an income-generating asset is the sum of cash flows expected over the life of the asset, discounted by an appropriate rate. The discount rate is fairly easy to get, predicting the future cash flows is very difficult, but not impossible.
- To increase odds of success, I usually create 2 or 3 scenarios for growth, ROE, etc., and then buy as low as possible under the conservative scenario.
- Wider swings just give me more room (greater margin of safety) under the conservative scenario to buy. That's why I love THQI, especially these days.
- In the equity markets, few people really use FA to come up with their buy/sell decisions. If they did, the price wouldn't fluctuate so much. Their lack of homework is a great opportunity for us longs -- we can take advantage of them when they get scared and want to dump the stock at, say, $24 or below.
...anyway, just another approach to being long in this fantastic company. Best of luck to you.
-OGM |
