The moment we haven't hit the keyboard is considered Quality And Value investment.
The moment we have hit the keyboard is considered speculative investment, because we don't know what next with happen, the thought of management can suddenly turn bad and so the ROIC; the customer may draw back due to sudden disagreement etc.
We need a framework to compare with P/E to evaluate the P/E worthiness.
The framework used by Peter Lynch is the Net Profit Growth.
The framework used by Munger-Buffettism is the ROIC.
I have found that enterprise value to operating earnings and prices to sales and operating cash flows are the most reliable indicators of a stock’s intrinsic value, presuming the company is a quality enterprise with high returns on equity and invested capital generating superior free cash flows.
@absolutetotalcompound - Thanks for your reply and suggestions! I am also a big fan of Lynch and Buffett/Munger/Li Lu.
Quality Value Investing achieves alpha by investing in a company’s current wealth and a stock price’s present value. PEG and it’s derivatives are speculative predictive analyses that are used only as tiebreakers not tiemakers in the QVI model.
Predictive analysis such as PEG reminds me of this quote published in The Wall Street Journal in 1993 that still holds today:
“There are two kinds of forecasters: those who don’t know and those who don’t know they don’t know.” —Economist John Kenneth Galbraith to The Wall Street Journal.
You may include:
CROIC
= ROIC × Quality of Earning
You may include the following quiz in your book:
In what condition of EPS and Dividend Yields, the P/E multiple kisses Dividend Yield Ratio?
Answer:
Outcome:
P/E = Dividend Yield
Condition:
√(100×EPS×DPS)
When this P/E = Dividend Yield outcome arises, what does it imply in value investing horizon?
The moment we haven't hit the keyboard is considered Quality And Value investment.
The moment we have hit the keyboard is considered speculative investment, because we don't know what next with happen, the thought of management can suddenly turn bad and so the ROIC; the customer may draw back due to sudden disagreement etc.
We need a framework to compare with P/E to evaluate the P/E worthiness.
The framework used by Peter Lynch is the Net Profit Growth.
The framework used by Munger-Buffettism is the ROIC.
Mind to demystify the most approachable formula of intrinsic value that you consider to date?
Cheers
I have found that enterprise value to operating earnings and prices to sales and operating cash flows are the most reliable indicators of a stock’s intrinsic value, presuming the company is a quality enterprise with high returns on equity and invested capital generating superior free cash flows.
You were mentioning about relative valuation.
Relative valuation has nothing to do with intrinsic value.
Mr. David,
You may consider to include in your book of these :
PEG=1 Concept :
Peter Lynch
PEROIC=1 Concept :
Charlie Munger
Warren Buffett
Lilu
@absolutetotalcompound - Thanks for your reply and suggestions! I am also a big fan of Lynch and Buffett/Munger/Li Lu.
Quality Value Investing achieves alpha by investing in a company’s current wealth and a stock price’s present value. PEG and it’s derivatives are speculative predictive analyses that are used only as tiebreakers not tiemakers in the QVI model.
Predictive analysis such as PEG reminds me of this quote published in The Wall Street Journal in 1993 that still holds today:
“There are two kinds of forecasters: those who don’t know and those who don’t know they don’t know.” —Economist John Kenneth Galbraith to The Wall Street Journal.