A Reader’s Question
Hey John,
Thanks for sharing and giving advice on my previous query. I am interning in a fund that practices value investing philosophy now and learning at a much faster pace than as a retail investor. Institutional investors certainly have more firepower when it comes to gathering more information. Had me pointlessly worrying why my knowledge of industries was so shallow as a retail investor ha ha ha. But no excuses for not read up broadly and extensively!
Came across these slides.
Greenwald_ReunionPresentationApril08
One of them is on Jae Jun’s site. Not sure whether you have came across it. The reunion presentation slides contained some workings which I think is Greenwald’s? (Downloaded it off Columbia’s site)
I believe they could shed some light on how Prof. Greenwald measures business returns. (You audited his classes before, maybe you would know better)
Some questions that I have:
From EPV slide:
- Slide 35& 42: I don’t quite really understand the steps. For slide 42, I think this might be the workings for slide 35. Don’t quite really understand them either. How did he get cash and the growth rate. And what is option.
- Slide 36: Why does he use 2 methods to calculate the expected return for each respective market?
From the reunion presentation slides: It is largely similar to the EPV slides except the last few slides that are handwritten. For Gannett, I can’t decipher the workings without any context. No idea how to get distribution, organic growth or reinvestment. Needless to say, clueless for the Walmart and Amex returns as well.
I think a more quantitative approach to calculate the expected rate of return would be more useful in determining intrinsic value and Greenwald presents us his way of doing it.
How I would value a company is for instance, Company W earns $50million for FY 2012. By determining the expected return (X), we can take 50/X to determine the value of the business. Reading the way how Buffett valued Mid Continent Tab, he seems to approach valuation this way. But of course, he has a deep understanding of the industry such that he is able to project an accurate return.
Not sure if you or your readers could help out.
My reply: Ok, CSInvesting readers are the smartest in the world, so I will let them have first crack at your questions before I chime in. …I will be back later to answer.
Via CSInvesting