Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (1391)	3/1/1999 2:21:00 PM
From: Freedom Fighter	Read Replies (1) of 1722

Porc, Porc on Wayne's view: >>Graham and Dodd = Value Investing = Discounted Present Value of Future Free Cash Flow (DCF), period, end of story, now and forever.<< Wayne on Wayne: "My position is approximately that. However, there are many methods within that definition that can be used to determine a "good" business value. There are numerous possible models and approaches. Some look at earnings streams, some at assets, some at free cash flows, some at ROE etc... But at core they all are trying to buy more in "business value" than they are paying."<< Porc: >>I think this is an implicit admission that I am not mischaracterizing where you are coming from.<< It is if you are saying that I only discount free cash to determine value and everything else is not value investing. I use more than 10 different models and approaches to try to determine a good deal. Some are straight from "security analysis" and "the intelligent investor". Some are from Buffett's and Munger's writings. Some are original. Some are from more conventional thought on Wall St. I categorize eveything that Buffett does to be value investing in the Graham sense and naturally I consider everything Graham did to be value investing. (at least the stuff I have read about) Both are buying businesses for less than their estimation of what they are worth. The tools and possibilities are a little different but they are exclusively looking at value. Anything that helps determine what a business is worth is cool with me. I just consider "business worth" to be related to earnings, return on equity and capital, asset values, free cash generation, future prospects and things of that nature. As one simple example, the net/net asset value of the past was value investing even though you generally weren't discounting future free cash flow as in the definition. In those days it was a value because you could theoretically remove the excess cash from the business or liquidate it without severance pay etc and get more than you paid So the liquidation process was really a discounted cash flow determined value even if you didn't necessarily do the calc. It would be today too if you subtracted the costs of severance etc... Wayne

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