If you want to understand and use it, you must have a little financial knowledge as the foundation.
No one can accurately calculate the true intrinsic value of an enterprise (even Buffett), which is almost enough.
I have been reading and thinking about Buffett's words recently. After the accounting exam, I read Buffett's letter to shareholders for the fourth time, and I feel very different. I once stayed at the level of understanding some of Buffett's views, but I was confused about how to calculate the value of a company and how to specifically judge whether a stock has great investment value. The question that I have been thinking about recently is how Buffett calculates. Buffett uses the method of calculating the intrinsic value of an enterprise, specifically the discounted cash flow method method.
I think the key to Buffett's idea is to ensure the relative accuracy of intrinsic value, and then compare intrinsic value with market value to see if there is enough safe space to decide whether to buy! Ensuring the accuracy of intrinsic value requires two conditions.
1. Excellent enterprises can ensure the stability and increase of cash flow, which is the key to calculating intrinsic value!
2. Capability circle: the range you can understand, and insist on only being the enterprise you understand! Just the key to calculating cash flow!
By the way, what is the excellent enterprise in Buffett's eyes! The following conditions shall be met
1 It is what customers need; 2 the customer thinks that no substitute can be found; 3 Not subject to price restrictions.
I think Maotai, which meets such conditions in China, is one! Buffy chose Coca-Cola and Gillette Wells Fargo.
Why don't we ask you this question and give you 65.438+0 billion and the best manager? Can you beat Coca-Cola and Maotai in coke and wine? This is a better proof method!
Buffett likes to buy shares in excellent and stable enterprises managed by excellent managers at the right price. There are two key points here, the right price and excellent enterprises. These two problems are interrelated! All Buffett's requirements for the company are to be able to reliably predict the cash flow that the company can generate in the future. Without this premise, the calculated enterprise value will be very unreliable. If it is not an excellent enterprise, no price is appropriate! Because you can't be sure of the future of the enterprise! All Buffett's ideas are to strive for a more reliable valuation, which is why Buffett constantly emphasizes the ability circle. Only businesses and enterprises that he can understand can calculate accurate cash flow!
Buffett uses the discounted cash flow method method, which Buffett believes is a way to accurately estimate the intrinsic value of the company. But this is based on the calculation of excellent enterprises!
This method has two key problems, one is the company's cash flow, and the other is the discount rate, which is the risk-free interest rate. Buffett thinks the discount rate is the interest rate of 30-year US Treasury bonds. The cash flow problem to be solved now, the cash flow data compiled by indirect method is generally calculated by (1) the company's net profit +(2) depreciation expenses, depreciation expenses, amortization expenses and other cash expenses. But Buffett thinks that the fashionable thing like Wall Street can't really reflect the company's cash flow, so it is impossible to evaluate the company's value. Buffett believes that the company's cash flow should be (65,438+0) the company's net profit +(2) depreciation expenses, depreciation expenses, amortization expenses and some other cash expenses-(3) the average annual capitalization expenses of the plant and equipment to maintain a long-term competitive position and unit output.
The third judgment is more important. A key word "competence circle" is designed here, and Buffett only insists on being a company he knows. Why? As mentioned above, improve the accuracy of calculating intrinsic value! Only the enterprises we know can accurately judge (3) the average annual capitalized expenditure of enterprises on plant and equipment, so as to maintain their long-term competitive position and unit output. This is based on our knowledge and understanding of society! It is important to constantly improve your knowledge and ability and analyze aquatic products, but you must be self-aware!
The following is an example of estimating Buffett's calculation process, and more processes need to be considered and studied. Because the enterprise is concerned about (3) the average annual capitalization expenditure of the plant and equipment used by the enterprise to maintain its long-term competitive position and unit output. I can't make a specific judgment, so I use corporate net profit instead! Assume that the depreciation expense is equal to the actual expense, that is, the previous expense (2) is equal to the expense (3). Buffett invested in Coca-Cola at 1988.
The following information is taken from Robert's The Road to Warren Buffett, and some modifications have been made.
Future cash flow forecast: the cash flow in 1988 is 828 million USD, and it will increase at the rate of 10 in the year after10 (actually 17.8% in the first seven years), which is an excellent enterprise nature and ensures the cash flow. From 1988 to 1, the net cash flow increased to 5%.
Discount rate: The yield of 30-year US Treasury bonds 1988 is 9%. The discount rate is a variable data.
Appraisal result:
From 65438 to 0988, the intrinsic value of Coca-Cola's stock was $48.377 billion.
Assuming that the cash flow continues to grow at a rate of 5%, the intrinsic value is still $20.7 billion ($828 million divided by 9%-5%).
Far higher than148 billion dollars1the market value of Coca-Cola when Buffett bought it in 998! The formula used here is the same as that used by the company after 10, that is, the present value of cash flow = the present value of cash held at the end of the period /k-g, where k is the discount rate and g is the growth rate. This formula is used when k is less than g. ..
The following explains the calculation of k greater than g, that is, the calculation process of the previous 10 year with the growth rate of 15%. The calculation after 1 1 year uses the formula mentioned above.
Estimated year 1234556789 10
The estimated stable cash flow is 9.5210.9512.5914.4816.6519.15 22.02 25.33 29.19.
The present value coefficient of compound interest is 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460.422
The present value of annual cash flow is 8.74 9.22 9.7210.2610.8210.4212.0512.75438+01.
The total cash flow is112.5 billion.
After 10 years, the total cash flow is 1 1 year, and the cash flow is 35170,000.
35.17/9%-5% = 87.93 billion, which is the present value discounted to the end of 10. Converted into present value of 879.30/0.4224 = 3710.43 billion.
The intrinsic value is 48.39 billion, and the range is between 20.7 billion and 48.39 billion!
The present value coefficient of compound interest can be checked or calculated by yourself. In this example, the first year is11.09, and the second year is11.09 *1.09 to interpolate!