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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Pirah Naman who wrote (47868)10/14/2001 2:53:48 PM
From: Thomas Mercer-Hursh  Read Replies (2) of 54805
 
Most valuation methods have already been tested in real time, with real money

Tested how? By having more money at the end than at the start? How do you know you wouldn't have made more or less with some other method? Where is the real testing here?

Frankly, I just can't see Buffett throwing a bunch of numbers into a spreadsheet, getting out a 5.5 and deciding its a buy. I am sure that his valuation includes numerical elements, but I am confident that it is a far more detailed study of where the company is today, where he thinks it can or will be in some years, what that is likely to mean in the change of the stock price, and how that relates to the current price and the difference.

Besides, by staying out of tech, most of the companies he is likely to be looking at probably would have trouble imagining 25% growth, especially on a sustained basis ... a very different realm of speculation than the 100% YoY growth we have seen in many of the companies we have looked at here.

No, I am not suggesting that his or your methods are coincidence ... simply that without this kind of examination they just really haven't been evaluated and they certainly haven't been compared to alternate methods. Merely looking at a company closely enough to do a good FCF calculation is probably a good start on the kind of due diligence which helps a person to make sensible investing decisions, whether they calculate anything or not.
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