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

To: armi who wrote (40829)	12/27/2010 5:01:38 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78835

As you say, each company is different. If I look at JNJ as a value investment similar to other value investments, then for me, the best (highest) value I come up with is that fair value for JNJ is about $67. Of course JNJ is not your typical value company. Maybe it isn't a growth company like it once was, but it's perhaps more growthie than value. Plus you have the increasing every year dividend and the the company's super long business history and good performance. Stuff that I can't or don't value quantitatively. I have shares of JNJ, and will consider adding more if stock drops to near $60 or below again.

To: armi who wrote (40829)	12/27/2010 6:36:37 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78835

OK, you totally lost me with your example here. I can't understand what you are doing and how and why. For example, if you're doing DCF you shouldn't have to use any multiple. If you're using a multiple, then you're probably doing something closer to Buffettology spreadsheet which is not a real DCF... :/ How about a walkthrough of your calculations? :) JNJ. Here's how I would do DCF: Earnings ~15B based on 9 months of 2010 ( =11392/3*4 ) Assuming 10% growth for 5 years and flat after that and 15% threshold discount, current value is 145B. I got this by plugging numbers into moneychimp.com Since the market cap is ~170B, we won't get the threshold return (15%) by buying JNJ here. Assuming 10% growth for 10 years and flat after that and 15% threshold discount, current value is 182B. With this assumption we would get 15% by buying JNJ here. IMHO, 10% growth for 10 years is too optimistic for such a large cap, so for me JNJ is a lukewarm buy here based on DCF. Using other approaches though (Buffettology spreadsheet, P/E, etc.), it is a good buy. Myself, I hold a position, but I'm not buying more here.