"Investment gains are a component of earnings. It's true that if you count them twice you will come up with a significantly higher value. "
If equity was $1 billion in 2000 and close to $4 billion in 2004, this suggests an addition of $1 billion a year. I find it hard to justify a DCF model that takes $200 million or so as the starting amount for earnings. I mean if you ran this calculation 4 years ago, there is no way you would have today's numbers.
All I'm saying is something is missing from your model.
My alternative valuation method is as follows:
Study how Madcow/dead doyle shorts WTM in the $300's. Watch how the stock goes to $600's.
Analyze how Madcow/dead doyle now values Wtm in the $300's.
Conclude Madcow/dead doyle does not know his/her a** from first base.
Put a buy order in for Wtm for MY TWO SHARES! (oops! that last part just slipped out)
Then watch how Madcow/dead doyle accuses me of using multiple id's.
I did provide an alternative valuation method: Add to your calculation the average capital investment gains and plug it into your formula....the number will be significantly higher.
"What does that mean? You buy a stock in the expectation that it will appreciate in value. "
Yes...that is generally the idea, or do you buy them so that they can depreciate?
"Regardless, you have to have SOME method for determining the stock's value, right? WHAT'S YOURS!?!?"
As in the first paragraph, add in the gains from investment. Investment is a great way to create wealth, so when WTM invests the billions of dollars at its disposal, and then in turn those companies and/or stocks quadruple in say a decade, your stake is worth much more. In fact, it is worth much more than if you bought those stocks with your own cash since the leverage is just fantastic.
It seems my scenario is much more likely considering a) it is based on history b) even if they DO NOTHING, there will be investment gains orders of magnitude greater than the operational profits.
You haven't provided an alternative valuation method.
'Buy a stock, stock triples in a decade, sell stock. You can't account for this by DCF, therefore such calculations are self-delusional.'
What does that mean? You buy a stock in the expectation that it will appreciate in value. If, in ten years, you think it has the potential to continue to appreciate in value, maybe you keep it or maybe you sell it and move to the Bahamas. Regardless, you have to have SOME method for determining the stock's value, right? WHAT'S YOURS!?!?
You were the one who asked for proof that the stock wasn't worth more than it's market price. Graham's discounted sum of future earnings formula is a widely-accepted method for determining intrinsic value. What do YOU use?
The problem is that when your profits come partially from operations and partially from capital gains from investment, you can't remove one from the other. How can a future discounted cash-flow equation, for example, account for this activity: Buy a stock, stock triples in a decade, sell stock. You can't account for this by DCF, therefore such calculations are self-delusional.
That is just plain dumb. No one can, but the technical analyis Doyle does makes as much sense as anything else posted in this space.
And you can parse words, but the stock was at 680, and now its sitting right under 605-for no apparent reason. That to me is almost 12%...and the question remains-why? Why did it go up to 680 so fast and now how did it fall just as fast? The business is the same, ownership is the same and the company has not released any news which the market would act on so negatively-so it is relevant to ask if the Buffett influance might be a factor or if certain owners of blocs of the stock can in fact alter its "natural" price since the stock is so thinly traded. Address the issues bestermann and quit throwing stones unless you have something to actually say.