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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Pirah Naman who wrote (43561)	6/16/2001 1:52:05 PM
From: Stock Farmer	Read Replies (2) of 54805

Pirah: We are both right... but there is a subtle twist. You the individual investor would be smart if you chose a different discount rate per company. This discount rate should take into account not only macro-economic risk factors, industry risk factors and "risk free" inflation rate factors... but it should take into account company specific risk factors. You being a smart investor would not want to choose one too high (that overweights current situation), or too low (excess certainty). "Just Right" comes to mind. Well, if you dive into the definition of "WACC" for a company, you will discover presto that it is coincidentally exactly the right discount rate for you to choose! So yes, you the investor get to choose (you are right). But you don't need to make it up out of thin air (WACC, by it's very definition is your ideal choice)! John.

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