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

To: scipio_caelestis who wrote (61266)	9/3/2018 3:26:48 PM
From: bruwin	Read Replies (2) \| Respond to of 78775

Firstly, you stated .... ... does greatly influence the value ultimately calculated for the stock." For "value" I would rather put "price". Secondly, "There it is presented as a qualitative* measure of the attractiveness of stock versus government bonds"* David Clark referred specifically to 'Corporate Bonds' and not government bonds. Because he's a recognized authority on Buffett's investment strategy, I assume that it's that type of bond that Buffett prefers to use. And as for choosing the 'Corporate Rate' my understanding from David Clark's writing is that one uses the current high grade, long term Corporate Bond Rate, e.g. the 10 year AAA Corporate Bond Rate. So, for the sake of the exercise, one can look up the current 10 year AAA rate and use that. I don't think that a few fractions of a percent either way will make much difference, seeing as one is not putting it into a "discounted" formula as one uses, for example, for the DCF calculation. You are not putting the rate percentage to the "power of" anything, such as "1,15^10". As you will see in several of the calculated examples that he presents, he refers to what the Corporate Rate was in a particular year. There was the time that Yahoo Finance used to put out these different grade and term Corporate Bond rates, but I can't seem to find their page these days, so I make do with the best that I can find. Another book that interrogates the analysis of Financial Statements, in layman's language, is :- "The Interpretation of Financial Statements" by Benjamin Graham & Spencer B. Meredith (0-88730-913-5). For what it's worth, I believe it's really important and imperative that one can read and understand and interpret financial statements, especially if they've been properly audited. And, IMO, the most important one is the Income Statement. Because, at the end of the day, it's the Bottom Line of the Income Statement, after any deductions for a dividend payout, that greatly affects the Balance Sheet, because it's that number that gets added to "Retained Income". This is especially the case if there has been no change in Share Capital, seeing as .... Share Capital + Retained Income = Total Assets - Total Liabilities. And as in any equation what is added to one side must automatically be reflected in the other side. And as it happens, the right side of that equation is also the "Book Value" of the company, and we all know how important "Price/Book Value" was to Ben Graham ......