Comments on: The Value Of A Moat http://www.fwallstreet.com/article/39-the-value-of-a-moat/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: john http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-3082 john Tue, 17 Nov 2009 10:35:58 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-3082 Correlating the value of a moat into market prices, when Mr. Market gets pessimistic, he prices wide-moat companies absurdly low. That translates into a buying opportunity. When he comes into his senses and gets rational, the price will adjust as the business grows larger than the industry. And when the crowd notices it and starts rushing in with Mr. Market's greediness, we sell and wait for another opportunity. This is what happened in the Philippines on Feb. I jumped in with my two feet without having to do much number crunching (I would be able to find more bargains if I did). I'm lucky, to have found this website early in my investing career! ps. the prescription might read: repeat until rich. Correlating the value of a moat into market prices, when Mr. Market gets pessimistic, he prices wide-moat companies absurdly low. That translates into a buying opportunity. When he comes into his senses and gets rational, the price will adjust as the business grows larger than the industry. And when the crowd notices it and starts rushing in with Mr. Market’s greediness, we sell and wait for another opportunity.

This is what happened in the Philippines on Feb. I jumped in with my two feet without having to do much number crunching (I would be able to find more bargains if I did). I’m lucky, to have found this website early in my investing career!

ps. the prescription might read: repeat until rich.

]]> By: john http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-3063 john Sun, 04 Oct 2009 10:22:05 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-3063 "Munger has his own idea of how the cost of capital should be measured. Buffett has explained that at Berkshire, the cost of capital is measured by the company's ability to create more than $1 of value for every $1 of earnings retained. "If we're keeping $1 bills that would be worth more in your hands than in ours, then we've failed to exceed our cost of capital," Buffett said." WOW! Thanks again for another insight. That "retained earnings test" really shed light into it and made it much more simpler. I googled WACC as BPal suggested and got the concept but still its complexity somewhat eluded me. (Thanks, still for that, BPal. I just can't get my head around on too much complexity (",). I'm still learning and reading every investment book I can get my hands on.) “Munger has his own idea of how the cost of capital should be measured. Buffett has explained that at Berkshire, the cost of capital is measured by the company’s ability to create more than $1 of value for every $1 of earnings retained. “If we’re keeping $1 bills that would be worth more in your hands than in ours, then we’ve failed to exceed our cost of capital,” Buffett said.”

WOW!

Thanks again for another insight.

That “retained earnings test” really shed light into it and made it much more simpler. I googled WACC as BPal suggested and got the concept but still its complexity somewhat eluded me.

(Thanks, still for that, BPal. I just can’t get my head around on too much complexity (“,). I’m still learning and reading every investment book I can get my hands on.)

]]> By: Joe Ponzio http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-3039 Joe Ponzio Tue, 29 Sep 2009 09:05:49 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-3039 Be careful with WACC. Check out <a href="http://seshnath.blogspot.com/2007/11/cost-of-capital.html" title="this exchange between Charlie Munger and Professor William Bratton" target="_blank">this exchange between Charlie Munger and Professor William Bratton</a> on this very topic. Be careful with WACC. Check out this exchange between Charlie Munger and Professor William Bratton on this very topic.

]]> By: BPal http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-3025 BPal Wed, 09 Sep 2009 09:38:14 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-3025 WACC is easy. Google it and you'll have a formula in 2 seconds. WACC is easy. Google it and you’ll have a formula in 2 seconds.

]]> By: john http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-3024 john Mon, 07 Sep 2009 11:21:20 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-3024 Joe, I found the following passage from a book: "Return on Invested Capital (ROIC) must be greater than the Weighted Average Cost of Capital (WACC), otherwise growth has no value." RIOC is pretty easy to compute (CROIC, in your case). But how do you compute for WACC? Is there a quick and dirty analysis for this? Thanks! Joe,

I found the following passage from a book:

“Return on Invested Capital (ROIC) must be greater than the Weighted Average Cost of Capital (WACC), otherwise growth has no value.”

RIOC is pretty easy to compute (CROIC, in your case). But how do you compute for WACC? Is there a quick and dirty analysis for this?

Thanks!

]]> By: Mike Melloch (MikeR) http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-866 Mike Melloch (MikeR) Sun, 25 Nov 2007 11:32:57 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-866 Stuart, I get a value of $38.34 for ADBE. I agree ADBE is a great company and if by some miracle it pulls back to 75% of intrinsic value I am all over it. Stuart,

I get a value of $38.34 for ADBE. I agree ADBE is a great company and if by some miracle it pulls back to 75% of intrinsic value I am all over it.

]]> By: Dog training http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-864 Dog training Sun, 25 Nov 2007 10:00:17 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-864 Very interesting... as always! Cheers from -Switzerland-. Very interesting… as always! Cheers from -Switzerland-.

]]> By: stuart http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-802 stuart Sun, 18 Nov 2007 09:30:43 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-802 Hi Joe, a truely inspiring blog, the more I read the more I have gain in confidence that I might just have a clue what I am doing finally when I am looking for good companies. I would like to hear more about your thoughts with a company such as Adobe. I am heavily involved in using there products and realise their incredible moat in the design world which with the future of Flash and Internet services, can only grow even with Microsoft shooting at them from the starboard side with Silverlight. However, having worked through their finances as you have taught in your blog, I realise they seem grossly over priced, by my calculation.....I would love to know firstly if I have maybe completely miscalculated, or if I need to consider many more things about the company before contemplating a company like Adobe as a good investment. I cannot imagine the Co. losing that much value in its share price to match my calculations anytime in the next 10+ years. What are your views? I am not looking for a buy confirmation, more the detailed understanding of why they can be so over priced compared to what they are worth, would you expect the share price to fall to fall in line with intrinsic value? Many thanks for all the education Stuart Hi Joe,

a truely inspiring blog, the more I read the more I have gain in confidence that I might just have a clue what I am doing finally when I am looking for good companies. I would like to hear more about your thoughts with a company such as Adobe. I am heavily involved in using there products and realise their incredible moat in the design world which with the future of Flash and Internet services, can only grow even with Microsoft shooting at them from the starboard side with Silverlight. However, having worked through their finances as you have taught in your blog, I realise they seem grossly over priced, by my calculation…..I would love to know firstly if I have maybe completely miscalculated, or if I need to consider many more things about the company before contemplating a company like Adobe as a good investment. I cannot imagine the Co. losing that much value in its share price to match my calculations anytime in the next 10+ years. What are your views? I am not looking for a buy confirmation, more the detailed understanding of why they can be so over priced compared to what they are worth, would you expect the share price to fall to fall in line with intrinsic value?

Many thanks for all the education

Stuart

]]> By: Sammy Lucci http://www.fwallstreet.com/article/39-the-value-of-a-moat/#comment-118 Sammy Lucci Tue, 07 Aug 2007 07:17:08 +0000 http://www.fwallstreet.com/article/39-the-value-of-a-moat#comment-118 Thanks, Joe. I'm sure I speak for the rest of the readers when i say that your blog entries are truly golden. You have nailed the concept of "edu-tainment" dead on. Thank you for all the effort you put into your blog. Thanks, Joe. I’m sure I speak for the rest of the readers when i say that your blog entries are truly golden. You have nailed the concept of “edu-tainment” dead on. Thank you for all the effort you put into your blog.

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