Even though I think of myself as value investor, I am not a valuation purist. Specifically:
I just revisited the valuations I did 1.5 to 1 year back, and they are often quite close to current price. I do not attach too much meaning to this short term check, especially in the context of raging bull market. Anyhow, here it is:
With '-' I marked stocks that I did not value this year.
* - yes, I'm estimating GM & VRX to be few-baggers within a few years. These valuations are of course very sensitive to the assumptions I made and on top of that VRX has a substantial risk due to high debt that I do not explicitly discount for. GM's valuation comes mostly from my projections of Transportations as a Service earnings, while VRX comes mostly from repayment of debt thanks to robust cash flows.
Based on this latest iteration, I will be rebalancing my portfolio soon. Stay tuned.
- I do not use CAPM, as I do not think beta derived from price action has much meaning
- I use flat 10% discount rate, and strive to be conservative in estimating cashflows
- I try to read through and understand details of financial statements, but usually I do not model each variable separately, but use aggregate data
- I strive to limit myself to companies with very good business models and able and honest management
- I follow developments in each company I'm invested in and try to understand if there are any changes that permanently affect the business
- I choose growth rates based on history and my understanding of the business, even if superficially they look wrong (e.g. for a few years I was estimating GOOG EPS growth in 14-18% range for the next 10 years - bold, but if anything, I actually underestimated it)
I just revisited the valuations I did 1.5 to 1 year back, and they are often quite close to current price. I do not attach too much meaning to this short term check, especially in the context of raging bull market. Anyhow, here it is:
| Company | previous price | previous valuation | 2018-02-02 price | 2018 valuation |
| AAPL | 103 | 168 | 160 | 183 |
| BRK.B | 144 | 222 | 209 | 223 |
| GM | 31 | 44 | 41 | 188* |
| GOOG | 773 | 1064 | 1111 | 1607 |
| WFC | 48 | 60.5 | 64 | - |
| VER | 11.06 | 11.38 | 7.09 | 10.63 |
| KHC | 81 | 62 | 77 | - |
| VRX | - | - | 18 | 97.5* |
* - yes, I'm estimating GM & VRX to be few-baggers within a few years. These valuations are of course very sensitive to the assumptions I made and on top of that VRX has a substantial risk due to high debt that I do not explicitly discount for. GM's valuation comes mostly from my projections of Transportations as a Service earnings, while VRX comes mostly from repayment of debt thanks to robust cash flows.
Based on this latest iteration, I will be rebalancing my portfolio soon. Stay tuned.
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