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Walter Investment Management Corp. Message Board

  • spinoffdude spinoffdude Jun 3, 2010 11:00 PM Flag

    Intrinsic value of WAC

     

    Long day.
    I'm not inclined to waste my time any more pointing out the utter ridiculousness of haveseenitall's posts. His record speaks for itself - in a word - he sucks. As we all agreed that he is clueless and has no idea what he's talking about, let's all ignore him and move on. OK?

    To calculate the intrinsic value of WAC:
    1. determine the actual free cash flows. This is not the same as the dividend, nor is it the EPS. You'll have to do some adjustments. It would take too long to spell them all out so, if you don't know how, get a textbook.
    2. Divide the free cash flow by the high yield bond rate which is currently just over 9%. This is a comparable alternative investment to WAC. Go here to find the yield. http://online.wsj.com/mdc/public/page/2_3022-bondbnchmrk.html?mod=topnav_2_3010. I use the "US Corporate Data" from Merrill Lynch.
    3. Add the value of the excess cash balances that are not currently invested and are not needed for operations.

    You should get a figure around $18.50. Realize that stock prices fluctuate daily while intrinsic value does not. Expect prices to be above and below your estimate - sometimes for quite awhile - months. This is because most people are either greedy or fearful and have not done their homework and figured out a reasonable intrinsic value.

    Decide IN ADVANCE how far below intrinsic value the price needs to be before you invest. This is really a confidence factor. How sure are you of your estimates? The less sure, the bigger the discount needs to be.
    Same process for selling except how high does the price need to be is the question. Exploit the differences between price and value.

    That's about it. It's simple but that doesn't mean it's easy.
    Do your own work. Don't trust anyone else - even me - and especially not haveseen and his inbred cousins who just follow their emotions.
    Understand the business so you can make an informed judgment as to the future free cash flows.

    Forgive my typo's as I am doing this on an iphone.
    Happy investing to everyone.

    This topic is deleted.
 
WAC
27.58-1.48(-5.09%)Jul 31 4:05 PMEDT

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