| | | Re: Old Folk Portfolio -- Buys
The objective here is to buy companies representing good values. I am basing valuations on a company's intrinsic value.
Intrinsic value is a fundamental, objective value that is based on the company's financials (such as revenue, net income, cash, debt, etc.). Where market price tells you the price other people are willing to pay, intrinsic value shows you the stock's value based on an analysis of its actual financial performance.
A stock has no "absolute" intrinsic value because the future is not predetermined. Therefore there are several DCF models for different scenarios of the company's future so you can see a complete picture of the investment risks and opportunities. Those scenarios are broken down to Bull, Base or Bear.
Since the market is in a significant correction, I am assuming more risk in adding at this point and thus I am using the bear scenario in determining value. This would be worst case expectations.
I prefer to buy at a discount to intrinsic value using the bear scenario but I am willing to go as high as 5% above. This would still have it well below the base scenario.
I added to the following companies:
Company -- % of discount/premium bear scenario
MS .. -36% (steep discount)
FDX .. -28%
ORCC .. -22%
OCSL .. -11%
BTI .. -7%
HTGC .. -3%
BX .. Fair Value
ARES .. +2%
CMI .. +5%
I made an exception with TSCO because the position is so small and it needs to be built up in size. Since it is overvalued I wanted to use Relative Value.
Relative valuation is used to value companies by comparing them to "other businesses" based on certain metrics such as EV/Revenue, EV/EBITDA, and P/E ratios.
In other words instead of comparing TSCO to itself, it was compared to its peers and as a result is selling at a discount to its peers.
TSCO .. -9% |
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