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Can anyone give me an IV for IDE? Thanks in advance. 
Students of Roger Montgomery's (Buffett's) intrinsic valuation method
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Can anyone give me an IV for HFA? Thanks in advance
Macros - I have to say I am impressed with your presentation of data! I thought my excel presentation was pretty good, but you take it to another level.
Are you able to share what tools you are using to creating and managing your reports? Is it purely excel?
Update: Ok I have just been going back and reading older posts and Macro clearly tells us that he is using Excel. Great achievement - it looks fantastic. However I have a quick question. If a company is looking like an opportunity do you then manually open up the annual reports to validate your numbers? I remember Roger mentioning that frequently data is often incorrect on brokerage sites, or they report different date (I must say in my experience I haven't observed this).
rx22,
I use Excel in a quite similar way to Macros and have established a graphical output similar to what Macros has achieved however with less detail and a different look. His suits his purposes, mine suits mine, however I believe both are quite efficient and effective in portraying the value of a company.
Anyhow, not sure about Macros approach, but what you've described is certainly what I aim to do. Use excel to basically punch in a stock code, FGE for example, all relevant data updates automatically whether its pulled from morningstar, Ninemsn, yahoo etc etc. Usually the ballpark of this data is correct so if the graphs and information it provides shows a good case for further information, then annual statement can be used to manually enter any errors, revisit info and charts, if still compelling case then the next part is choosing when to enter.
Thats the basics of it, and validates what you've said about checking online data vs the annual statements. I'll post an example tonight when i'm home from work of my excel output.
Cheers
I use Excel in a quite similar way to Macros and have established a graphical output similar to what Macros has achieved however with less detail and a different look. His suits his purposes, mine suits mine, however I believe both are quite efficient and effective in portraying the value of a company.
Anyhow, not sure about Macros approach, but what you've described is certainly what I aim to do. Use excel to basically punch in a stock code, FGE for example, all relevant data updates automatically whether its pulled from morningstar, Ninemsn, yahoo etc etc. Usually the ballpark of this data is correct so if the graphs and information it provides shows a good case for further information, then annual statement can be used to manually enter any errors, revisit info and charts, if still compelling case then the next part is choosing when to enter.
Thats the basics of it, and validates what you've said about checking online data vs the annual statements. I'll post an example tonight when i'm home from work of my excel output.
Cheers
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Interesting your valuations are about the same as mine.
I am using RMs model.
FGE is still one of the few companies out there with a reasonable MOS along with MCE. TSM, and CCP.
Good work Kermit... Like Macro's, it provides an easily interpret-able form. Last night I started on revising my spreadsheet to now incorporate automated feeds and include a few new charts. Unfortunately time is limited, work, wife and kids seem to take a majority of this. So in between all that I am updating my spreadsheet, hopefully have something in a couple of weeks which I will post.
Charts last night was interesting in excel, especially putting together a combined area chart + stepped chart with a single axis timeline..... all part of the fun though
Intrinsic Value - My model is completely different to Roger's, but i'm glad it yields close to the same results as your workings, puts my mind at ease a bit.
rx2 - I have the advantage of being 24 years old and having minimal responsibilities and workingin the finance industry. If you need any help with the excel charting side of things feel free to PM me, i'll help where i can. The actual Excel help is pretty useful as well
rx2 - I have the advantage of being 24 years old and having minimal responsibilities and workingin the finance industry
. If you need any help with the excel charting side of things feel free to PM me, i'll help where i can. The actual Excel help is pretty useful as well 
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Intrinsic Value - My model is completely different to Roger's, but i'm glad it yields close to the same results as your workings, puts my mind at ease a bit.
rx2 - I have the advantage of being 24 years old and having minimal responsibilities and workingin the finance industry
Hi kermit
I assume you wrote code to pull the data from Yahoo? If so, you don't know any sites that show how to work with the individual table fields do you? It's a 5 minute job to pull the data in with an automated web query, but I'm hoping there's a way to actually pull in the individual fields. Appreciate any links or hints you might have
Thanks
Macros put me onto an addin for excel which then allows you to put in equations that draw from yahoo. I used these equations with some manipulation to get to the point i'm at. I can't remember the name of the addin off top of my head, but if you google you may be able to find it.
The tables 11.1 and 11.2 which are used to obtain the Multiplier end at a ROE of 60%. How does one extrpolate for companies with Roe above 60%.Roger Montgomery's new book expounds and expands Warren Buffet's methods of calculating/ forecasting a share price based on the intrinsic value of a company.
Roger has a blog but not an efficient forum where students can help each other. If you are a student of Montgomery/ Buffet and want to share or ask questions about your calculations/ methods post your thoughts here.
All for one and one for all!
ljsalda
A lovely looking graph, without doubt.
It looks like you've defined 'value' to be EPS * 20, all the way from 2007 to 2013, using the Morningstar EPS forecasts.
The equation I use is definitely not as simple as multiplying EPS by 20.
Takes into account EPS, DPS, ROE, D/E and Required Return. I also discount the DPS component as I believe theirs more benefit in retained EPS if the ROE can be replicated at an ongoing basis rather then paying a dividend.
Glad you like the look of the graph, but do i detect some sarcasm and skepticism in your post?
No no, I do like your graphs -- no sarcasm -- they're very visually appealing.
But looking at your FGE "EPS vs DPS vs valuation chart", the valuation pips pretty much sit at the top of the earnings bars, and since the ratio between the LHS and RHS scales is 1:20, that means the valuation is pretty much 20 times earnings, from 2007 to 2013.
I don't doubt that you're using all those factors you describe, but the result is a simple "value = eps*20", or very close to it. If it was anything different, the value pips would sit at a different place relative to the top of the EPS bar. Hard to judge the exact values from the graph, but I'm just going from the fixed relativity between EPS and value.
Ah ok fair enough, sorry thought you were having a bit of a crack.
The equation puts a high emphasis on Earnings re-invested back into the company (EPS less DPS). Therefore typically as a company maintains EPS growth with a relatively constant payout ratio you'll typically see my valuations trend as you've indicated. Not always typically by a multiplier of 20 as thats not what the equation follows. Must also make mention that it remains at the tip of each EPS bar simply due to the max and min axis values as automatically determined by Excel. I could change these and it wouldn't fit as closely but I guess it just shows the relevance of EPS and DPS to my valuation model.
If Forge was to increase its payout ratio, you'd see the valuation change quite a bit.
I can see where your coming from though, and I think that consistency is also due to the required rate of return staying the same. I'd be very interested in putting together an equation that automatically determines this rather then manually entering based on my assumptions but i'm not sure how exactly to go about it. Roger has basically said he won't be dropping any hints on how the equation he uses to automatically determine Required Rate of Return either.
The equation puts a high emphasis on Earnings re-invested back into the company (EPS less DPS). Therefore typically as a company maintains EPS growth with a relatively constant payout ratio you'll typically see my valuations trend as you've indicated. Not always typically by a multiplier of 20 as thats not what the equation follows. Must also make mention that it remains at the tip of each EPS bar simply due to the max and min axis values as automatically determined by Excel. I could change these and it wouldn't fit as closely but I guess it just shows the relevance of EPS and DPS to my valuation model.
If Forge was to increase its payout ratio, you'd see the valuation change quite a bit.
I can see where your coming from though, and I think that consistency is also due to the required rate of return staying the same. I'd be very interested in putting together an equation that automatically determines this rather then manually entering based on my assumptions but i'm not sure how exactly to go about it. Roger has basically said he won't be dropping any hints on how the equation he uses to automatically determine Required Rate of Return either.
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Hi Kermit,
what are you measuring for 'Management' (shown at the bottom of your graphical presentation)?
Chris
what are you measuring for 'Management' (shown at the bottom of your graphical presentation)?
Chris
Just a manual allocation I make on what I think the ability of management is which has a very slight effect on the overall valuation equation.
Basically when i'm looking at a company, I enter 3 things into my spreadsheet. The stock code, a management allocation (100% being normal) and the required return. That entire graphic then automatically populates and then if fixes need to be made to any of the financials I can manually adjust myself as well.
I'd like to have the required return automated with an in-built equation but haven't looked into it enough yet. I could probably remove the management allocation part as it has a tiny effect on the valuation anyway, but believe its important to recognize good management as well.
Some people will agree or disagree with it, but I'm not too fussed as its the system i've developed over more than 12 months now and i'm very happy with where it has ended up. I'm building up capital now to start aggressively investing in stocks my spreadsheet and further research identify. I'm already invested in FGE and MML which have came down quite a bit recently, but I believe as risk returns to the market and their reporting takes place they will recover well.
Basically when i'm looking at a company, I enter 3 things into my spreadsheet. The stock code, a management allocation (100% being normal) and the required return. That entire graphic then automatically populates and then if fixes need to be made to any of the financials I can manually adjust myself as well.
I'd like to have the required return automated with an in-built equation but haven't looked into it enough yet. I could probably remove the management allocation part as it has a tiny effect on the valuation anyway, but believe its important to recognize good management as well.
Some people will agree or disagree with it, but I'm not too fussed as its the system i've developed over more than 12 months now and i'm very happy with where it has ended up. I'm building up capital now to start aggressively investing in stocks my spreadsheet and further research identify. I'm already invested in FGE and MML which have came down quite a bit recently, but I believe as risk returns to the market and their reporting takes place they will recover well.
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I have no problem with Roger's valuation techniques or assessment of businesses based on sound fundamentals. However, I would like to point out here that a big flaw with Roger's approach, and many value investors, is to avoid the big issues. Roger states that he is a terrible economist, but I think understanding the economy and direction is a very important factor with investing.
I used to use Roger's blog on a regular basis but have found that Roger has has somehow turned it into a resource that caters to popular opinion. With investing, everyone has a different view, but it doesn't mean that every view is correct all the time.
For some reason, many value investors love retail companies. Roger states that they have a sustainable competitive advantage and can create economic moats. Well what has happened to David Jones? Where has their moat gone? Was it ever there? DJS is down from over $5 in Sept last year to $3.15 today (-37%). I'm not surprised in the least. Retail stocks are suffering due to a structural issue in that we have ended an exponential credit expansion cycle. This is a big problem! The adjustment to online retailing etc is, in my opinion, based primarily on consumers adjusting to lower cost options as a result of the massive change to the credit cycle.
Given that valuations are driven by earnings strength and direction, is it not of vital importance to have an indication of where earnings are likely to head?
Also with the banks. Why does Roger like banks? They are also supported and liked by many 'value' investors due to their apparent safety and high dividends. In my view they are a terrible place to be given the credit cycle and global credit issues.
Roger mentioned that he either owned, or was looking at a gold producer. It wasn't very clear and gave the impression that it was a temporary issue. Why are companies such as BHP and RIO acceptable, yet exceptionally profitable companies such as Medusa MML and Ramelius RMS frowned upon. The gold thread that Roger started was closed fairly quickly, and instead of addressing the issue, it was treated as wild speculation.
If you aren't seriously looking at gold producers, then you have your held in the sand with regards to the global debt crisis which is ongoing and will end with a bang. Yet somehow, gold producers and gold in particular, is seen as almost sacrilegious to many value investors. Why? This is not a religion. As an investor one should never close their eyes to the big issues or have preconceived ideas as to what is good or bad.
If one can accept that the big trends are important, why is it that retailers = safe and profitable gold producers = speculation? Surely it depends on the environment and economic landscapes which can last for many years if not decades.
Thoughts?
I used to use Roger's blog on a regular basis but have found that Roger has has somehow turned it into a resource that caters to popular opinion. With investing, everyone has a different view, but it doesn't mean that every view is correct all the time.
For some reason, many value investors love retail companies. Roger states that they have a sustainable competitive advantage and can create economic moats. Well what has happened to David Jones? Where has their moat gone? Was it ever there? DJS is down from over $5 in Sept last year to $3.15 today (-37%). I'm not surprised in the least. Retail stocks are suffering due to a structural issue in that we have ended an exponential credit expansion cycle. This is a big problem! The adjustment to online retailing etc is, in my opinion, based primarily on consumers adjusting to lower cost options as a result of the massive change to the credit cycle.
Given that valuations are driven by earnings strength and direction, is it not of vital importance to have an indication of where earnings are likely to head?
Also with the banks. Why does Roger like banks? They are also supported and liked by many 'value' investors due to their apparent safety and high dividends. In my view they are a terrible place to be given the credit cycle and global credit issues.
Roger mentioned that he either owned, or was looking at a gold producer. It wasn't very clear and gave the impression that it was a temporary issue. Why are companies such as BHP and RIO acceptable, yet exceptionally profitable companies such as Medusa MML and Ramelius RMS frowned upon. The gold thread that Roger started was closed fairly quickly, and instead of addressing the issue, it was treated as wild speculation.
If you aren't seriously looking at gold producers, then you have your held in the sand with regards to the global debt crisis which is ongoing and will end with a bang. Yet somehow, gold producers and gold in particular, is seen as almost sacrilegious to many value investors. Why? This is not a religion. As an investor one should never close their eyes to the big issues or have preconceived ideas as to what is good or bad.
If one can accept that the big trends are important, why is it that retailers = safe and profitable gold producers = speculation? Surely it depends on the environment and economic landscapes which can last for many years if not decades.
Thoughts?
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I agree with you in regard of the intrinsic valuation method if only considering the calculations. This is not what Roger is saying though as his definition of excellent businesses are those that also have future prospects and sound management. It is understandable how a business with sound qualities and good underlying return on equity is likely to withstand market or global trends better than a business which is overcapitalised for the same. Buffet also avoided stocks where he did not understand the underlying business well enough, even if some of those businesses had good return on equity and profits. Each investor will have their own market (business) knowledge and understanding of different fields which is crucial to be exercised in addition to valuation.
