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Technology Stocks : Warren Buffett

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To: TwoBear who wrote (40)	3/7/1997 10:42:00 AM
From: Andrew	of 82

Scott, What I do is try to estimate conservatively a future stream of owner earnings. Then using a model that's sometimes called the Dividend Discount Model, I bring that whole stream of earnings back to a single price at the present time. This price represents what a rational investor would pay now for that stream of earnings if he/she could get interest rate i (used in the model) on his/her money elsewhere (i.e. the long bond). As I said before, I do add a few points to the bond rate for the sake of conservatism. Hagstrom's book covers all this well. He does the present value calculations all out in "long-hand". There are economics formulas which do the same thing but faster. I haven't been able to get a copy of either of Graham's books. From what I understand though, he certainly wouldn't have approved of this valuation technique that Buffett now talks about. He wanted a discount to book value, I think. Personally I think there is value in potential earnings growth. But I still plan on reading Graham's books. Also John B. Williams. I don't know Mesa, but I'll look into it... -Andrew

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