Comments on: Just Because You Know The Value… http://www.fwallstreet.com/article/61-just-because-you-know-the-value/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Joe Ponzio http://www.fwallstreet.com/article/61-just-because-you-know-the-value/#comment-1850 Joe Ponzio Thu, 19 Jun 2008 17:25:34 +0000 http://www.fwallstreet.com/article/61-just-because-you-know-the-value#comment-1850 A great price on a predictable business is perfectly acceptable. In my opinion, a "wonderful" business is, among other things, very predictable. If you have a very good idea of what the business is worth today, and you have a very good idea of what it will be worth in ten years, there is no reason you shouldn't buy it if the price is right. In his <a href="http://www.berkshirehathaway.com/letters/1992.html" title="1992 Letter to Shareholders" target="blank">1992 Letter to Shareholders</a> of Berkshire Hathaway, Buffett said: <p class="blockquote">The investment shown by the discounted-flows-of-cash calculation to be the cheapest is the one that the investor should purchase - irrespective of whether the business grows or doesn't, displays volatility or smoothness in its earnings, or carries a high price or low in relation to its current earnings and book value. The better you are at predicting the cash flows, the "worse" the business could be. You don't have to stick with the high profit margin, well-funded companies. Most people should because they tend to provide the most stable and predictable cash flows and make the valuation process much easier. A great price on a predictable business is perfectly acceptable. In my opinion, a “wonderful” business is, among other things, very predictable. If you have a very good idea of what the business is worth today, and you have a very good idea of what it will be worth in ten years, there is no reason you shouldn’t buy it if the price is right.

In his 1992 Letter to Shareholders of Berkshire Hathaway, Buffett said:

The investment shown by the discounted-flows-of-cash calculation to be the cheapest is the one that the investor should purchase – irrespective of whether the business grows or doesn’t, displays volatility or smoothness in its earnings, or carries a high price or low in relation to its current earnings and book value.

The better you are at predicting the cash flows, the “worse” the business could be. You don’t have to stick with the high profit margin, well-funded companies. Most people should because they tend to provide the most stable and predictable cash flows and make the valuation process much easier.

]]> By: Amit D. http://www.fwallstreet.com/article/61-just-because-you-know-the-value/#comment-1844 Amit D. Tue, 17 Jun 2008 03:22:41 +0000 http://www.fwallstreet.com/article/61-just-because-you-know-the-value#comment-1844 Once again, awesome advice. I have had some questions on the issue of recognizing great opportunities. Does a great price on a somewhat predictable business worth it? You made me second guess this. It has made me realize I might want to be as patient as possible in order to "swing the bat" on only the most Powerful and Reliable investments (considering the economic factors intrinsic value powerful moat). Thanks alot Mr. Ponzio! Once again, awesome advice. I have had some questions on the issue of recognizing great opportunities. Does a great price on a somewhat predictable business worth it? You made me second guess this. It has made me realize I might want to be as patient as possible in order to “swing the bat” on only the most Powerful and Reliable investments (considering the economic factors intrinsic value powerful moat).

Thanks alot Mr. Ponzio!

]]> By: StayRational http://www.fwallstreet.com/article/61-just-because-you-know-the-value/#comment-1576 StayRational Sat, 01 Mar 2008 17:21:21 +0000 http://www.fwallstreet.com/article/61-just-because-you-know-the-value#comment-1576 Nice post. Classic advice. Nice post. Classic advice.

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