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Intrinsic Value

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Gregg
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Intrinsic Value

Does anyone have any info on calculating intrinsic values of shares?
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Frequent Contributor

Re:Intrinsic Value

The definition is very wide, there are some methods like the discount cash flow model, but each model will work in some instances and not in others.
Think Graham used Price to Book to value, others use SOTP model and for smaller caps think P/NAV is used as well.

Please note: This is going from memory but its not my expertise

Personally my experience is that the since 1980 intrinsic value and fundamentals are a bit of a joke. But Im a guy that focuses on big picture, Im sure it could still apply to some individual companies.
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Frequent Contributor

Re:Intrinsic Value

Forgot to add, CFA chaps spend years learning all the calcs on intrinsic value, theres no one set standard.
Because the models are subjective and come to different results results vary from analyst to analyst, which is why you might get one guy who feels (eg) vodacom is intrinsically undervalued and another who feels its over-valued...hence why you have a market with buyers and sellers.
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Valued Contributor

Re:Intrinsic Value

most popular by a mile is DCF (3 part vid at http://justonelap.com/discounted-cash-flow-dcf-model-1/)
classic version is B Graham but I once did a scan of JSE stocks for his two methods and not one share came up
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Super Contributor

Re:Re:Intrinsic Value

Once a share's revenue stream and margin extraction ability is seen to be constant it is treated as a quasi-bond and DCF is the order of the day. Never mind that - even just JUST DISCOUNTED DIVIDEND STREAMS. Larger property companies are a classic example as are tobacco and alcohol companies. It is just so difficult -as a self-styled value investor - to pay R1 for a share that is backed by 2cents of assets. BUT then again - more often than not - most of those assets are worth nothing to anybody other than the company in question anyway.
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Super Contributor

Re:Re:Re:Intrinsic Value

Simon - I presume you scanned for companies with current assets in excess of market capitalisation? I think Grahams markets were so much less "price-discovered" that I sometimes wonder if all of those methods are still relevant(?)
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Valued Contributor

Re:Re:Re:Re:Intrinsic Value

that's first kicker, then there are other variables that you apply
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Super Contributor

Re:Re:Intrinsic Value

theres no one set standard. is this by design? one gets weird idea's when they pride themselves on standardizing everthing, that is the base for their job, without it there aint no job?
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Frequent Contributor

Re:Re:Re:Intrinsic Value

you give them WAY too much credit...theyre not THAT bright, just greedy, not bright :D
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Super Contributor

Re:Intrinsic Value

What is the intrinsic value of the Rand? With no backing (read gold standard abandoned) all is about faith and hope...
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Frequent Contributor

Re:Re:Intrinsic Value

Interesting that you mention the rand, according to Seed Investments using the Purchasing Power Parity (PPP) model its valued at R 10.40

http://www.seedinvestments.co.za/seed-weekly-investing-in-2016/

Technical point of view I still have my target of R11.50
but that has nothing to do with intrinsic value.
http://myshares.co.za/wp/2016/02/28/trade-idea-short-usdzar/
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Super Contributor

Re:Re:Re:Intrinsic Value

Either that - or we are about to see a wash of pent up inflation that corrects (for) this. Anyway - when your ability to service your national deficit is compromised beyond a certain point - and your social commitments continue to balloon - I am sure the market values in the direct destruction of the currency base - and cares less about excessive "implied" inflation rates. The Rand will spike if Zuma goes - after that - I simply cannot see why it shouldn't continue its relentless march cheaper.
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Frequent Contributor

Re:Re:Re:Re:Intrinsic Value

You cant see it if your picture is only on the politics of this country. You would need to consider much more whats going on in the US, EUR & Japan to determine the price of the ZAR.

If you disagree, or would like to investigate further, have a look at 2008 currency moves, SA wasnt better off and yet the ZAR strengthened significantly.
Its because sometimes other factors outside SA have a bigger influence that inside SA.
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Super Contributor

Re:Re:Re:Re:Re:Intrinsic Value

Believe you me - when our politics come into play - NOTHING else matters! The technicals become a nonsense! Have you already forgotten Zuma's December Nene fiasco. As for your 2008 assertion - our BOP, Deficit growth, forward social and civil service commitments are all far worse than they were - our debt to GDP has doubled. Or ability to raise funds will be hammered by a downgrade - our cost to service is already much higher AND let's not forget - we are comparing this to crash scenario - so I am not even sure it is relevant!(?) I have gone on about hedging against the Rand wile allowing for a short term pullback - at length over the past few months. Certain shares allow you to "have your cake and eat it" as it were! I simply will not go "LONG" the ZAR. Too much risk. It's a trade someone else can make. Purchasing parity can stay out of sync for years - and inflation will fix it eventually. Where do you think the growth will come from to fund our burgeoning deficit? More a matter of borrow or print methinks...
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Frequent Contributor

Re:Re:Re:Re:Re:Re:Intrinsic Value

Did you really just say that in 2008/2009 SA was in blue skies and it was right that the ZAR strengthened by 30%?

Why has the ZAR been strengethening then since January (4 months)? Because Pravin is fixing everything?
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Super Contributor

Re:Re:Re:Re:Re:Re:Re:Intrinsic Value

??? What? Your "blue sky" comment makes no sense and bears no resemblance to anything I said! It strengthened because Zuma's financial man was dumped! After that it has been about stability returning to commodity markets and emerging market appetite but - I think you are missing my point -I simply don't care! The political situation will rule - if things go wrong the ZAR will tank! If you think you can trade currencies - go for it! I have done this for years. The ZAR has ALWAYS been "undervalued" on a parity basis. I don't think I can remember a time in the last 20 years when weren't sold that story. Just look where that would have got you though... the currency has packed on a whopping -400% against the dollar.
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Frequent Contributor

Re:Re:Re:Re:Re:Re:Re:Re:Intrinsic Value

...what if I do trade currencies, my last 2 calls were short ZAR and long on EURUSD, both up quite well?
Posted them as well. Should I stop now?

I was just asking still why the ZAR strengthened in 2008 by 30%, your answer was that things are worse now, so I take it they were good in 2008?
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Super Contributor

Re:Re:Re:Re:Re:Re:Re:Re:Intrinsic Value

I said that 2008 was a crash and should not be used for comparative purposes. It was bad then - it is worse now! The Rand is in a deep downward trend that has consumed over 90% of its value over 40 years. Do you REALLY believe that we have the socio-economic wherewithal to turn the tide? Do you believe in the South African investment proposition? I have a lovely bridge I'd like to sell you! Buy Rands if you like.... or rather buy my bridge.
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Super Contributor

Re:Re:Re:Re:Re:Re:Re:Re:Re:Intrinsic Value

You argument is odious and have grown tedious. As for your trading... why would I care? This argument is about the Rand reacting to political risk. Despite all of your obfuscation and dishonest (mistaken?) misdirection - the crux of your case is that you don't believe this assertion. I fear we will get to test this soon enough. BUT it is only the risk I care about. Like everything else on the market - currencies go up the escalator and down the lift shaft.
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Frequent Contributor

Re:Re:Re:Re:Re:Re:Re:Re:Re:Intrinsic Value

I never said where the ZAR will be in the long term.
You simply assumed that I meant it was in a strengthening cycle, even though I pointed out my chart which showed its a short - medium term move.

I also dont like simply "disregarding" evidence like a crash when it doesnt suit my views, I take everything into consideration.
Doing so actually made me understand exactly why the rand has been moving the way its been since 1990.

Fundamentally though (as you refuse to speak technicals) if I was a hedge fund manager in the US I would rather be investing in SA at the moment, which is what they are doing. I can prove this with other research, however you would disregard this as well as this probably doesnt fall within your views.

You should research more on a "confirmation bias", could help your research. :P
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