| | | Lot of food to digest in this post, EKS.
I'll start with a few comments:
I don't like this "margin of safety" determination by Gurufocus that seems to rely on DCF calculations for all stocks. For a margin of safety It just seems to me there should be something I can see like in cash value, tangible book value, sum-of-parts analysis , value of contracts, etc. To get from a DCF calculation that there's a margin of safety now of 8% with TGT, seems simplistic and wrong to me. That TGT can and maybe will fluctuate 8% or more from here, yes. But 8% margin-of-safety seems wrong given TGT's long reach and long history.
I don't view calculation of fair value as the point above which is a negative margin of safety and below which there is a margin of safety.
We know the famous "stocks can remain undervalued longer than you can remain solvent", and maybe we need something on the other side. Like stocks can stay overvalued longer than you can stay patient.
Something related to Munger's comment to a question that yes, his Costco was overvalued, and yes, he nevertheless had no intention of ever selling it. For me, like WMT here. Even though the calculation of margin-of safety is so negative, I ignore such and continue with set-and-forget for my few shares.
For value stocks, I have said I prefer and I try to sell when they become fully-valued by my view. Not before. (unless I've waited maybe two years with no business/stock progress). For some stocks that are not typical value stocks or are just so growthy vs. value, like WMT, COST, et. al., I have moved to Munger's view.
Using DCF margin-of-safety to make buy/sell decision here, can be harmful to pocketbook! |
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