"[Warren Buffett's fundamental, value investing is primarily based on a few qualitive principles and the quantative assessment of intrinsic value to determine the fair value to pay if the company meets the other criteria. He has been quoted as saying the following about it:]
Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. ...
In other words, the percentage change in book value in any given year is likely to be reasonably close to that year's change in intrinsic value. ...
As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover and this would apply even to Charlie and me will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value.
[It should be remembered though that book value is a historic number and provides little information about the future prospects for a business. The best businesses are those with high returns on capital which need little further capital to grow earnings. Buffet has said as much in the following quotes from his Berkshire Hathaway Chairman's Letters.]
In past reports I have noted that book value at most companies differs widely from intrinsic business value the number that really counts for owners. Berkshire 1986 Letter
Book value's virtue as a score-keeping measure is that it is easy to calculate and doesn't involve the subjective (but important) judgments employed in calculation of intrinsic business value.
It is important to understand, however, that the two terms book value and intrinsic business value have very different meanings. Book value is an accounting concept, recording the accumulated financial input from both contributed capital and retained earnings. Intrinsic business value is an economic concept, estimating future cash output discounted to present value. Book value tells you what has been put i
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Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. ...
In other words, the percentage change in book value in any given year is likely to be reasonably close to that year's change in intrinsic value. ...
As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover and this would apply even to Charlie and me will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value.
[It should be remembered though that book value is a historic number and provides little information about the future prospects for a business. The best businesses are those with high returns on capital which need little further capital to grow earnings. Buffet has said as much in the following quotes from his Berkshire Hathaway Chairman's Letters.]
In past reports I have noted that book value at most companies differs widely from intrinsic business value the number that really counts for owners. Berkshire 1986 Letter
Book value's virtue as a score-keeping measure is that it is easy to calculate and doesn't involve the subjective (but important) judgments employed in calculation of intrinsic business value.
It is important to understand, however, that the two terms book value and intrinsic business value have very different meanings. Book value is an accounting concept, recording the accumulated financial input from both contributed capital and retained earnings. Intrinsic business value is an economic concept, estimating future cash output discounted to present value. Book value tells you what has been put in&thisCriteria2=&thisCriteria3=ont class=sampleQuote>[ Money / Invest ] - ID: 66348
"[Warren Buffett's fundamental, value investing is primarily based on a few qualitive principles and the quantative assessment of intrinsic value to determine the fair value to pay if the company meets the other criteria. He has been quoted as saying the following about it:]
Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. ...
In other words, the percentage change in book value in any given year is likely to be reasonably close to that year's change in intrinsic value. ...
As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover and this would apply even to Charlie and me will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value.
[It should be remembered though that book value is a historic number and provides little information about the future prospects for a business. The best businesses are those with high returns on capital which need little further capital to grow earnings. Buffet has said as much in the following quotes from his Berkshire Hathaway Chairman's Letters.]
In past reports I have noted that book value at most companies differs widely from intrinsic business value the number that really counts for owners. Berkshire 1986 Letter
Book value's virtue as a score-keeping measure is that it is easy to calculate and doesn't involve the subjective (but important) judgments employed in calculation of intrinsic business value.
It is important to understand, however, that the two terms book value and intrinsic business value have very different meanings. Book value is an accounting concept, recording the accumulated financial input from both contributed capital and retained earnings. Intrinsic business value is an economic concept, estimating future cash output discounted to present value. Book value tells you what has been put i&theme=ont class=sampleQuote>[ Money / Invest ] - ID: 66348
"[Warren Buffett's fundamental, value investing is primarily based on a few qualitive principles and the quantative assessment of intrinsic value to determine the fair value to pay if the company meets the other criteria. He has been quoted as saying the following about it:]
Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. ...
In other words, the percentage change in book value in any given year is likely to be reasonably close to that year's change in intrinsic value. ...
As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover and this would apply even to Charlie and me will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value.
[It should be remembered though that book value is a historic number and provides little information about the future prospects for a business. The best businesses are those with high returns on capital which need little further capital to grow earnings. Buffet has said as much in the following quotes from his Berkshire Hathaway Chairman's Letters.]
In past reports I have noted that book value at most companies differs widely from intrinsic business value the number that really counts for owners. Berkshire 1986 Letter
Book value's virtue as a score-keeping measure is that it is easy to calculate and doesn't involve the subjective (but important) judgments employed in calculation of intrinsic business value.
It is important to understand, however, that the two terms book value and intrinsic business value have very different meanings. Book value is an accounting concept, recording the accumulated financial input from both contributed capital and retained earnings. Intrinsic business value is an economic concept, estimating future cash output discounted to present value. Book value tells you what has been put i" TARGET="_top">Send as Free eCard