Value Investing Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

From: EddyRiquelme	6/24/2012 6:20:40 AM
	Read Replies (3) of 78683

Thanks E_K_S and Paul for your time and wisdom :) but if you could take just a little bit more time to read my reply that would be great So I take your points and it clears a lot of the accounting elements up. It gets quite confusing because I noticed that Ben Graham uses net current assets to define CA-CL-LT liabilities/net current asset value/liquidating value whereas these days net current asset value is = working capital! And yes, intrinsic value is not something that comes up at all in the intelligent investor (it isnt meant to be too complicated) but intrinsic value does come up in Security Analysis. The thing is, to me intrinisic value is so important as it is related to the margin of safety in the stock. If you dont know the intrinisic value- obviously you dont need to know the specific number but a rough idea of the intrinsic value- then you dont know the margin of safety which means you dont know the risk. A stock that is trading at PE 6 although seemingly undervalued may actually be priced at or around intrinsic value hence no margin of safety. Conversely a stock trading at PE 1000 may still be a value play if the intrinsic value is way above the price/share. I dont want to be buying a stock where there is no margin of safety as this would not be value investing? Therefore, understanding and at least trying to calculate it should be imperative. Now, in the security analysis 1940 edition it talks about Intrinsic value being = Earning power. What would I need to do to calculate earning power as it isnt exactly clear in security analysis how to do this. Do we discount future earnings and add retained earnings to get intrinsic value if there are any retained earnings? How far do we go into the future 5 to 10 years? Also, Retained earnings is what buffett means when he talks about the cash that can be taken out of the business correct? Or is he talking about something else. Something that I also came across is that Buffett states that focus on the balance sheet is more effective when working with smaller pools of money what does he mean by this and does this mean intrinsic value can be found on the balance sheet but how when intrinisic value = earning power. Buffett is know to focus on earnings of the company and therefore the income statement. Clearly, im confused here. Regards and thanks in advance Eddy

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next