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2:34 pm
August 3, 2010
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itconsultant
| | Irving, Texas | |
| Member | posts 34 |
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Jae wrote…'Hey good point. Intrinsic value = current price would be a good idea to see at what rate the company has grown."
When i set the future FCF growth rate such that intrinsic value = current price, I am getting an implied growth rate for FCF growth for the the future. It does not tell me the past growth rate…I think we are talking two different things….
Also, I am not sure how to use the 5 year historical Price V/s DCF Intrinsic Value chart. Are you telling me that the growth I put in there is also used to compute the Intrinsic price in the past and thats how that chart works?
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1:43 pm
August 3, 2010
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Jae Jun
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I haven't included the growth rate control mainly because I want to keep the inputs to a minimum and maintain a low learning curve.
I know it's somethign that many people want but my opinion is that if a company is expected to grow 5% in yr 1, 15% in yr2, 40% in yr 3, 15% in yr 4, then it would be best to just skip the company anyways.
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4:07 pm
August 2, 2010
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bbqrooster
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I definitely like the idea of adding in a spreadsheet for screening stocks. That would make this premium product even more useful. Something else that I want to see is not an additional spreadsheet, but modifications to the DCF evaluation spreadsheet. If you look at Joe Ponzio's stock analyzer spreadsheet, the DCF spreadsheet gives you control over the growth rate for each of the ten years instead of the same growth rate for the ten years. With this, I can have more flexibility in modeling the growth of some particular companies. You also mentioned in today's article about the Intrinsic value of a company = future cash flow + net worth. Has that been incorporated into the existing spreadsheets?
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10:25 pm
August 1, 2010
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Jae Jun
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Hey good point. Intrinsic value = current price would be a good idea to see at what rate the company has grown.
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5:48 pm
July 30, 2010
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itconsultant
| | Irving, Texas | |
| Member | posts 34 |
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The way i do reverse dcf is I assume a 12% discount rate and 3% terminal growth rate. then i change the 10 year FCF growth rate such that the intrinsic price = current price
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10:40 am
July 30, 2010
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Jonathan Watson
| | Los Angeles, CA | |
| Member | posts 11 |
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Jae-
After trying to work out the calculation, I realized that this was already represented by the graph. I was originally picturing a numerical listing of "backward looking" rates, but the graphical representation is much easier to interpret and visualize. These are the reasons why I love your spreadsheets!
Jonathan
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5:50 pm
July 29, 2010
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Jae Jun
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That's the way I've always been doing it.
Once I load the stock, I make some changes to the assumptions and then look at the price vs value graph.
If the historical stock price fits into the graph, then you've just applied the reverse DCF method.
I know when it's completely out of whack if the intrinsic value is much too high or low.
It's based on the fact that over the long run, price meets value.
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3:58 pm
July 29, 2010
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Jonathan Watson
| | Los Angeles, CA | |
| Member | posts 11 |
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Jae-
Thanks for all of your hard work on the spreadsheets. Such a great product! I think the amount of information it provides would overwhelm the most seasoned user- not just us newbies!
Over at F Wall Street there is a thread about Ponzio's spreadsheet and in it someone mentions the idea of reverse DCF. So instead of estimating future cash flows to determine intrinsic value, one takes the company's price now and determines Mr. Market's expectation for future earnings. I'll have to scratch my head and try to figure out how to make that calculation work, but I am sure the spreadsheet pulls all the necessary data.
For me, it resonates well with Charlie Munger's admonition to "invert, always invert." I think it would fit nicely right along side the other valuation methods.
Jonathan
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3:22 pm
July 29, 2010
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krackerjack121
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I was thinking just for the stock price. The rest of the financials are all relative. If there is a loss in Canadian dollars it would still be a loss in American Dollars.
Thanks,
Rocky
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11:39 pm
July 28, 2010
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Jae Jun
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krackerjack121 said:
Jae,
I was thinking about a feature that I would love to see is a currency convertor. From US Dollars to Canadian for instance. Don't know how feasible it would be to do that. But if you could I think it would be a great addition.
Rocky
Not sure what you mean by currency converter. Do you mean convert simple price per share numbers or the whole financial statement?
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11:38 pm
July 28, 2010
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Jae Jun
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Jonathan Watson said:
Jae-
I like the additional valuation idea incorporated into the premium spreadsheet. The more valuation methods I have (especially for different types of companies) the better sense I have for its intrinsic value.
I like the idea of a broad stock screen- something better than I what I tried to do with the S&P 500 list- that gives an at-a-glance idea of companties with a large margin of safety. Ultimately, I think you have created this with the screens on the website which serve as a good starting point for valuaiton.
One thing that I have been exploring recently is Graham's idea of purchasing companties at a low P/E (7-10) and selling them after they rise 50% or after 2 years. I'm wondering if there would be a way to back-test this and if the rules have changed since Graham looked at the market.
I'll have to create a test version first and see how well the valuation model works on a spreadsheet. But I agree that the more valuation models, the better, but to some, it just overwhelms. After all, the bredth of data and information provided by the spreadsheet is astounding to new users.
And it isn't really a stock screen because it will require manual input for the list of stocks and there wont be any valuations. Just basic financial ratios and numbers.
My idea is that I have the screeners which will automatically produce the ideas. But there is a gap between having to go through 50 stocks to narrow it down to one.
So what if you could just enter the 50 stocks quickly, get the basic numbers and narrow the list down even more before running it through the spreadsheet.
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11:33 pm
July 28, 2010
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Jae Jun
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To be honest, I already do have a stocklist feature on my version. I've been playing with it to see what it does and doesnt need.
The way it works is once you've analyzed the stock and made adjustments that you feel is right, you would go to the StockDB page and then press the "add stock" button.
Then all the important financial data will be collected and stored into this sheet.
Only very select few items will be dynamic and the rest will be static.
This way you know what you entered when you happen the run the stock again and can compare.
The more I think about it, the more I like the idea of the historical ratio valuation. Just having simple PE,PS,PB etc for 5 years should be very beneficial. I'll definitely add this for sure. Thanks! Glad I asked you.
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9:46 pm
July 28, 2010
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krackerjack121
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Jae,
I was thinking about a feature that I would love to see is a currency convertor. From US Dollars to Canadian for instance. Don't know how feasible it would be to do that. But if you could I think it would be a great addition.
Rocky
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11:57 am
July 28, 2010
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Jonathan Watson
| | Los Angeles, CA | |
| Member | posts 11 |
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Jae-
I like the additional valuation idea incorporated into the premium spreadsheet. The more valuation methods I have (especially for different types of companies) the better sense I have for its intrinsic value.
I like the idea of a broad stock screen- something better than I what I tried to do with the S&P 500 list- that gives an at-a-glance idea of companties with a large margin of safety. Ultimately, I think you have created this with the screens on the website which serve as a good starting point for valuaiton.
One thing that I have been exploring recently is Graham's idea of purchasing companties at a low P/E (7-10) and selling them after they rise 50% or after 2 years. I'm wondering if there would be a way to back-test this and if the rules have changed since Graham looked at the market.
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10:25 am
July 28, 2010
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itconsultant
| | Irving, Texas | |
| Member | posts 34 |
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Stock watch list sounds interesting. can you elaborate what it would store. Would it be a seperate excel file that would get updated if i decided to add a company to it ( like a database of my watch list stocks?).
I am not sure about another valuation model. I think what we have is good. Instead what I think is you could provide a historical and relative valuation tab. In the historical valuation, is there a way to display the P/E, P/S, P/B, P/CF, P/FCF, EV/EBITDA numbers for the last 10 years. I am not sure which price you will take. Average price of the year. Morningstar has this information…
I think the competitor tab is pretty good. i am not sure if it displays stuff like debt level in the competitors (debt/ equiity) etc.
FInally, what improvements did you have in mind for the Portfolio tracker? I use options too and there is no easy way to do this but i am doing myself in some fashion.
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9:48 am
July 28, 2010
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Jae Jun
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I received an email the other week related to the intrinsic value spreadsheets which got me thinking about several things.
The user correctly pointed out that the stock spreadsheet I offer is not ideal for screening. I completely agree with this as it was designed to analyze one stock at a time.
In order to fill the gap between trying to find stock ideas and analyzing one in depth, I'm planning to create an additional spreadsheet for the premium package which will serve to filter a big list of ideas into a much smaller one which you can then run individually.
It will act very much like the competitor comparison spreadsheet except you can enter as many stocks as you want and the speed should also be 10x faster.
Additionally, I wanted to ask you for what type of spreadsheet you want the most.
What Investment Spreadsheet Do You Need?
So far, I have the following spreadsheet ideas
- Stock watch list to keep track of stocks analyzed with the intrinsic value spreadsheet
- Update and improve portfolio tracker
- Include Active Value Investing valuation model (still considering as I don't want to overwhelm users)
Those are the top 3 ideas I have that I feel like I should be working on but I would really appreciate your input in the comments section below.
Any idea is welcome and open for discussion.
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