Intrinsic Value: A Big Deal?

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Intrinsic Value: A Big Deal?

Intrinsic Value: A Big Deal? via Safal Niveshak

Here is an email I received from a tribesman yesterday…

I agree that evaluating and buying great businesses at the correct price (i.e. prices below the intrinsic value) is of utmost importance.

However, while I think I am getting better in evaluating the growth of businesses, their durable moats and creating my own check list of investing, my biggest challenge is in calculating the range of the “intrinsic value”.

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I am still not able to calculate the risk associated with the stock and that is prohibiting me from confidently buying a stock which I believe is a value buy.

May I request you to please share any pointers, books, frameworks which can help me estimate the risk and/or this intrinsic value?

I believe this – calculating intrinsic value – is one big issue most investors face, and thus I thought of replying to this email via a post.

Well, the concept of intrinsic value is indeed tricky.

But it’s not tricky because it involves math, but because most of us work on intrinsic values while keeping an eye on stock prices.

So, we start with the assumption that calculating intrinsic value of a stock is difficult, then we see the stock’s price jumping up and down, then we try to connect the intrinsic value with this stock’s price, and then we think how in the world we can ever calculate intrinsic value of something with certainty whose ‘price’ is so uncertain.

Another thing that makes us