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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (11875)	1/17/2001 1:03:35 AM
From: TimbaBear	Read Replies (1) \| Respond to of 78625

Thank you Paul for that reference! I have the book, and re-read that section. I will be happy if I uncover a true 2/3NCA investment opportunity that shows me the potential to at least realize a valuation at book value. But mostly everything I uncover that looks like it might be one has so many problems that whatever "margin of safety" a supposedly low price gave me was more than compensated by increased risk of even lower future valuations. I must remember that Graham was coming out of a time where stock prices remained depressed for many years and the country was poor enough after the depression that wide spread capitulation had not only occurred, but had become a life-style. I am using Graham's discounting philosophy for assets, with some modifications. I am not discounting PPE by 85% as he suggests in Security Analysis. I am discounting all long term assets by 50% instead. My reasoning is: 1). we are not in a soft real estate market; 2)Most PPE has already been subject to large book discounts from depreciation and amortization, while not being adjusted(as nearly as I can tell)for any appreciation in land values; 3). the 50% discount on the other long term assets is probably a bit much for that class, and therefore would tend to compensate if I'm too lenient on the PPE. I will then add the NCA to this discounted long term asset amount to arrive at my own approximation of hardcore value(current moment only, not addressing the time value of money for this purpose). Perhaps it's presumptuous on my part, but I label this figure "NetNet Value" on my spreadsheets because I have netted out liabilities and have discounted(or netted)the value of the remaining assets. So if you see me refer to NetNets in my posts, the above will be how I arrive at the designation. The question then arises, by what measure, if any, do we evaluate the business of each company so that, when faced with 15-20 companies in various industries that all are selling well below their NetNet values, we can be reasonably sure that our final choices represent the best hope for safety and a reasonable return on our investment? What I'm looking for is some method that would provide consistency of results, something that doesn't involve as much "intuition" on my part. My research into CFO and FCF and DFCF, while teaching me a great deal, hasn't given me confidence that I've arrived at a solution that has eliminated the subjective out of my estimations and resultant valuations. Although I value "intuition" and don't think this game can be played without it, I also believe that prejudices(conscious and unconscious) can masquerade as intuition. When that happens, it usually has negative consequences on the valuations achieved. Timba