..........intrinsic Value Of A Stock.........

AdaG · #41 6th July 2008, 11:19 PM

Hi,
From quite some time I am trying to find out how evidently stock prices trace their intrinsic value path using their historical data but yet to reach on a conclusion.
The bull bear cycles of the indian market affects all of the stocks giving momentum to all of them at the same time. If price of a stock is higher than the intrinsic value it should come down but momentum strokes it up. Inevitably it is bound to come down but only after the bull cycle of the whole market is over not in the middle. From the conditions I feel that the intrinsic valuation of stocks may hold good in the Wall Street but as Indian markets are widely speculative in nature are attracting huge money from FIIs and are highly susceptible to the world economy unlike US, the valuation techniques are not so effective to stocks at this point of time.

And also there is no sure way to know when that intrinsic value will be reached....e.g. WB found the intrinsic value of petro china very less compared to its cmp so he invested 500mn it in '02-'03. But for almost 4-5 yrs nothing big happened. Later everyone knows the story. So maybe if we do find the intrinsic value of stocks there is no timeframe in which the market will correct its price to that level......during which period the momentum investors may gain handsomely viewing the macro conditions of the market.

So what I am looking is if there is any method to find (maybe by looking historical data or market/sector conditions) the time frame which the stock will take to reach this level.

Regards,
ADAG.

tejbir · #42 12th July 2008, 11:10 PM

Quote:

Originally Posted by WBfan

Hello everyone!

I have read "The Warren Buffett Way" by "Robert Hagstrom". In the book there is a chapter where they (I guess Robert) try to recapture how Warren Buffett thought when he bought huge amounts of shares in CocaCola, in 1998, using Buffetts prefered way of calculating a company´s intrinsic value. In the book they are displaying a table that shows how the calculation is made. The header says "The Coca Cola Company Discounted Owner Earnings Using a Two-Stage Dividend Discount Model". I have tried to figure out the logic of this model but I have failed in one respect. First they calculate the intrinsic value based on the proposed future earnings of the ntext ten years, using the "Discounted cash flow" model. Fine. Next they use the "Gordon Model" to calculate the intrinsic value over the rest of the companys life time and discount it back to today. Fine. Then they add up the two numbers they get for each calculation and says that this is the intrinsic value for Coca Cola in 1988. Also fine. What I don´t understand is why the accumulated owner earnings up until 1998 is not included (should be a considerable amount?!). Now, I don´t know if any of you have read the book, but maybe someone can follow the logic (or the lack thereoff) and see what I am missing??

Thanks in advance.

The reason why accummulated owner earnings are not included because they get accounted for in the companies ability to earn future cash flows to equity which have been discounted.

pokrate · #43 10th August 2008, 07:55 PM

Dearest members !
Please throw some light on this data.
The company has an equity capital of Rs 17.17 crore. Face value per
share is Rs 10.

The current price of Rs 606 discounts its Q1 June 2008 annualised EPS of Rs 46.06, by a PE multiple of 13.16.

What does this tell about the company. Strong buy/sell/hold ?

Similar Threads for: ..........intrinsic Value Of A Stock.........
Thread	Thread Starter	Forum	Replies	Last Post
ICICI Direct : You cannot trade on this stock:Please select another stock	amitkr	Brokers & Demat Matters	1	11th August 2005 11:49 PM
iit capital stock:You cannot trade on this stock	chopra	Stocks & Shares	2	9th June 2005 08:47 AM