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Students of Roger Montgomery's (Buffett's) intrinsic valuation method

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Huskar said:
For the sake of balance it should be observed that Roger was at Clime when it was over-exposed to Credit Corp as it imploded from $12 to 50c. He lost his investors a lot of money on that one (perhaps he has made it back since...).
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that the beauty of fund managers, when the good time roll on you rack in fees
when bad time arrives you lose other people money

Is there a better job out there?
 
RE: Mortgage Choice - MOC

My 2c...

I think that the more confident people are in purchasing property, the higher the turnover. Higher turnover = good for MOC. Lower turnover = bad for MOC. MOC therefore should be highly correlated to the property markets.

Confidence would be impacted by:
Expectations of price growth
Confidence in the economy
Confidence in the security of employment tenure
Expectation for steady or affordable interest rates
Ease of access to additional lending
-> all of which then increases confidence and turnover and has a virtuous cycle on the way up and a destructive cycle on the way down.

From the points listed above, none are currently in MOC's favour and this won't be turning around soon.

The exponential growth in credit the world (incl Aus) has had for the past few decades has ended as with all exponential increases. Credit growth can not return to its previous trajectory.

I'll make a call and suggest that MOC will need to raise capital in the next 12 months. This is a risky business, possibly likely to experience liquidity issues and declining profitability. The trend is definitely down.





 
Macros just thought i'd let you know that your valuations of MOC are almost identical to mine, however yours are 2 years earlier (as per your other recent comments on future valuations being realised earlier).
 
Quick Question guys...

If a company retains all its profits do you simply multiply EqPS by Table 11.2 Multiplier to produce the Intrinsic Value?

I attempted to do FML and result was $0.05 but am not sure where i have gone wrong..

2010 EOY Equity x Shares Outstanding = EqPS $0.034c
Payout Ratio is 0%
ROE of 15%
Investor Required Return of 12%

Any tips?

Sorry for being a Newbie to Rogers Method..
 
Sorry but I can't help there skip. I'm only familiar with the essence of Roger's investing principles but not the actual formula.
 
skip9 said:
Quick Question guys...

If a company retains all its profits do you simply multiply EqPS by Table 11.2 Multiplier to produce the Intrinsic Value?
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Page 184, second sentence of his book clearly gives the answer. I'll try getting an iv for it now...
 
I got an IV lower than yours, not sure how you got such a high ROE. Did you average it over the past two years at least? In any case, the ROE would be much too low for me to consider buying.

For the purposes of valuing it, I don't think you've done anything terribly wrong. I would probably give it a much higher IRR than you did though.
 
Invisible i used Broker Forecast 2011 NPAT divided by 2010 EOY Equity.. Should i be using 2010 EOY NPAT?
 
Ahh i have been using Forecasted EOY NPAT rather than Reported NPAT from previous financial year.. may be my problem..
 
skip9 said:
Invisible i used Broker Forecast 2011 NPAT divided by 2010 EOY Equity.. Should i be using 2010 EOY NPAT?
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You have assumed a zero payout ration but then used 2010 EOY equity. If a company is retaining all its earnings then 2011 EOY equity will be significantly higher (hopefully) than 2010. I'd use the average of the two.
 
Figured a bit of stuff out today..

Did a Valuation of MML as shown below.. how does it stack up compared to others?

ROE is calculated by adding BOY Equity + Forecasted EOY Equity / 2 which is then divded into the NPAT.

Forecasted NPAT is done via calculating EPS Growth % from EPS Forecasts and then added onto previous NPAT figure.. e.g. if EPS growth Rate is 5% then 5% of Previous NPAT is added onto that total figure giving a rough forecasted NPAT..

IRR of 12%

 
skip9 said:
Figured a bit of stuff out today..

Did a Valuation of MML as shown below.. how does it stack up compared to others?
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Looks to me like you've got Shareholders Equity in the wrong years.

From the company accounts, 2010A was $175m, but you're showing that for 2011E.

Also note that these equity figures are in US$ -- But your earnings figures seem to be in A$. Thus ROE seems wide of the mark.
 
For the techies out there, does anyone know how to code a cell so that the multiplier values can automatically appear after entering the RR and ROE? its such a pain entering it manually every time a change occurs!
 
VSntchr said:
For the techies out there, does anyone know how to code a cell so that the multiplier values can automatically appear after entering the RR and ROE? its such a pain entering it manually every time a change occurs!
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If you copied the entire table into Excel, then using the INDEX function with a couple of nested MATCH functions will do what you want.

The formula is floating around on here somewhere that shows how RM developed that table.
 
I'm an excel junkie so could probably work up the equations for you if you had the spreadsheet handy.

I'm assuming you would like to enter the RR and ROE so that it automatically drops the correct multiplier value from a table into a particular cell or the equation.

I don't use Roger Montgomery's method of valuation so don't have the spreadsheet coded up already myself, but if you can upload the excel doc i can code it in for you if you like. Keep in mind I stick to using the equations I know best in excel which may not always be the most efficient but get the job done. So if your looking for a neat way of doing it you may be best to ask someone else.
 

Ahh i didnt realise that the figures were $US - jsut checked the broker report and they are in $US.

Do i just use the current exchange rate or is there an average or what not exchange rate that i should calculate it off?
 
skip9 said:
Ahh i didnt realise that the figures were $US - jsut checked the broker report and they are in $US.

Do i just use the current exchange rate or is there an average or what not exchange rate that i should calculate it off?
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It can be fairly complicated. Most businesses apply a weighted exchange rate month by month, and then there's an adjusting entry for realised exchange gains or losses. Doing it yourself is fraught with error because its exceedingly unlikely you'll choose the same method as whoever is generating the AUD figures you're also using, and even modest timing differences can produce large differences.

The best approach, IMO, is to grab your data from a single source in a single currency. Grab a free morningstar account and you can get all your data there. Or use your comsec or etrade account and grab it from there. Same same.
 
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