My articles are designed to simulate the questions that Buffett and Munger tend to ask. The intrinsic value are estimations bsed on FCF and shares outstanding.
Is General Electric an Intelligent Investment? [View article]
I do not think we should lay all the blame on Immelt himself. The world economy is changing. Which competitive fronts does GE wish to do battle in?
GE could focus on the solution for increasing shareholder value... 1. increase transparency 2. reduce debt 3. buy back and reduce the number of shares 4. focus on GE's core strengths
Is General Electric an Intelligent Investment? [View article]
I approached GE as an intellectual exercise; to estimate an "intrinsic value" per share. In the case of GE, it used a debt to equity ratio of 4.48 to achieve a 5-year average return on equity of 15.9 percent.
Alternatively, using a debt to equity ratio of 0.47, UnitedHealth Group shows a 5-year average return on equity = 19.3 Based on a holding and compounding period of 10 years, and a purchase price bargain of 55. percent, and a relative FCF growth of 7 percent, then the estimated effective annual yield on this investment may possibly be greater than 15.3 %.
Buffett 'Feels Poorer' Based on Kraft's Cadbury Bid [View article]
The real argument is proper valuation of both KFT and CBY as independent businesses and as a joint business entity. Buffett simply does not want Kraft to overpay for Cadbury. He also does not want Kraft to dilute shareholder value by issuing more shares. Kraft already has 1.5 BILLION shares outstanding. If anything, it should consider buying back stock as the economy improves. Based on data from 2004 forward, I currently estimate the intrisic value of Kraft to be around $36 per share and the intrinsic value of Cadbury to be around $32 per share. I would like to read more estimated intrinsic values from these other financial journalists." I estimated the intrinsic value/share of CBY to be around $32 US. Multiply this by 343.5 million shares and we get $10,992,000,000. So, lets say a round $11 billion dollar valuation from me. I read that Cadbury approved the Kraft Foods takeover of the company, and the final offer was worth $18.9 billion, an improved bid from the previous $17.1 billion proposal. In my view, they are overpaying by around $8 billion.
Book Review: Bruce Greenwald's Value Investing Does a Great Job Teaching Readers [View article]
I too am a fan of this book. His stepwise approach to valuation is mentioned briefly in my book "The Four Filters Invention of Warren Buffett and Charlie Munger " www.amazon.com/dp/0615... I also enjoyed reading about the other approaches to value investing in the back third of Professor Greenwald's book.
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
I think these academic papers help to explain why Buffett and Munger's Four Filters Process outperform the conventional "framing effects" on decision making.
Takemura,K. 1992 Effect of decision time on framing of decision: A case of risky choice behavior. Psychologia, 35,180-185. (In English)
Takemura,K. 1993 The effect of decision frame and decision justification on risky choice. Japanese Psychological Research, 35, 36-40.(In English)
Takemura,K. 1994 Influence of elaboration on the framing of decision. Journal of Psychology, 128, 33-39. (In English)
Takemura,K. 1994 An theoretical explanation of the framing effect: Contingent focus model of decision making under risk. Japanese Psychological Review, 37, 270-291.(In Japanese with English abstract)
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
I think these academic papers help to explain why Buffett and Munger's Four Filters Process outperform the conventional "framing effects" on decision making.
Takemura,K. 1992 Effect of decision time on framing of decision: A case of risky choice behavior. Psychologia, 35,180-185. (In English)
Takemura,K. 1993 The effect of decision frame and decision justification on risky choice. Japanese Psychological Research, 35, 36-40.(In English)
Takemura,K. 1994 Influence of elaboration on the framing of decision. Journal of Psychology, 128, 33-39. (In English)
Takemura,K. 1994 An theoretical explanation of the framing effect: Contingent focus model of decision making under risk. Japanese Psychological Review, 37, 270-291.(In Japanese with English abstract)
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
The Four Filters: U + SCA + ATM + MOS
Jake,
Thanks for a balanced and critical review. The Buffett and Munger innovation was in how they "framed" their investing decision before making it. The liberal use of quotes (which Mr. Buffett approved) was intentional... so that the reader would feel that he was listening to Buffett and not the author Labitan.
I tried to hide my own biases; but a little leaked out in the SOAP process described in chapter 3. The intent there was to show the reader that we can form a general impression of managers using both feelings and facts... using both subjective and objective data.
Here is an old audio clip of Mr. Buffett mentioning the 4 decision filters: [frips.com]
I think the key to appreciating the filters as I do, is to imagine what each of the 4 clusters really represent. 1. Develop an understanding of the economics of the business and its products. 2. SCA is really about Customers. 3. ATM, Able and Trustworthy Managers and 4. Ben Graham's Margin of Safety by buying below Intrinsic Value.
If we give credit to Ben Graham for filter four; then the real advance of the Buffett+Munger collaboration is in "U+SCA+ATM."
Here is an audio that hints at their "growth" in learning towards finding the "wonderful business." [frips.com]
Before we find the "wonderful business," look at the wonderful runner. Imagine a marathon runner and additive factors this way... endurance + strength + determination + experience will probably beat the runner with only endurance + determination.
I hope this explanation helps your readers appreciate the Buffett and Munger innovation of combining 3 qualitative steps with 1 quantitative step... in order to have a higher probability of a better outcome.
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
The Four Filters: U + SCA + ATM + MOS
Jake,
Thanks for a balanced and critical review. The Buffett and Munger innovation was in how they "framed" their investing decision before making it. The liberal use of quotes (which Mr. Buffett approved) was intentional... so that the reader would feel that he was listening to Buffett and not the author Labitan.
I tried to hide my own biases; but a little leaked out in the SOAP process described in chapter 3. The intent there was to show the reader that we can form a general impression of managers using both feelings and facts... using both subjective and objective data.
Here is an old audio clip of Mr. Buffett mentioning the 4 decision filters: [frips.com]
I think the key to appreciating the filters as I do, is to imagine what each of the 4 clusters really represent. 1. Develop an understanding of the economics of the business and its products. 2. SCA is really about Customers. 3. ATM, Able and Trustworthy Managers and 4. Ben Graham's Margin of Safety by buying below Intrinsic Value.
If we give credit to Ben Graham for filter four; then the real advance of the Buffett+Munger collaboration is in "U+SCA+ATM."
Here is an audio that hints at their "growth" in learning towards finding the "wonderful business." [frips.com]
Before we find the "wonderful business," look at the wonderful runner. Imagine a marathon runner and additive factors this way... endurance + strength + determination + experience will probably beat the runner with only endurance + determination.
I hope this explanation helps your readers appreciate the Buffett and Munger innovation of combining 3 qualitative steps with 1 quantitative step... in order to have a higher probability of a better outcome.
Book Recommendations by Gates, Buffett and Munger [View article]
These men are not going to recommend books about themselves. However, I wish to point out that my book attempts to carefully explain the genius of Buffett and Munger's contribution to Behavioral Finance.
In my view, Buffett and Munger advanced the area of "decision framing" and outlined a sensible approach to valuation by including all the important stakeholders in a four "decision cluster" process.
"The Four Filters Invention of Warren Buffett and Charlie Munger" paperback is available from Amazon.com and the audio cd version is available from Lulu.com here: www.lulu.com/content/5...
Here is a short audio clip for your readers to review. And, pay special attention to the last minute of the audio. It is a bit scratchy, but careful listeners will appreciate its historical significance. frips.com/4m.mp3
This is the abridged version of the book: "The Four Filters Invention of Warren Buffett and Charlie Munger". This book examines each of the basic steps Buffett and Munger use in "framing and making" an investment decision. It is a focused look into an amazing invention within "Behavioral Finance."
A Value Look at Exxon Mobil [View article]
Is Alcoa a Value Investment? [View article]
Market Price = $12.1
Therefore, not currently a bargain.
Is Baxter International a Value Investment? [View article]
Is General Electric an Intelligent Investment? [View article]
GE could focus on the solution for increasing shareholder value...
1. increase transparency
2. reduce debt
3. buy back and reduce the number of shares
4. focus on GE's core strengths
Is General Electric an Intelligent Investment? [View article]
Alternatively, using a debt to equity ratio of 0.47, UnitedHealth Group shows a 5-year average return on equity = 19.3
Based on a holding and compounding period of 10 years, and a purchase price bargain of 55. percent, and a relative FCF growth of 7 percent, then the estimated effective annual yield on this investment may possibly be greater than 15.3 %.
Buffett 'Feels Poorer' Based on Kraft's Cadbury Bid [View article]
financial journalists." I estimated the intrinsic value/share of CBY to be around $32 US. Multiply this by 343.5 million shares and we get $10,992,000,000. So, lets say a round $11 billion dollar valuation from me. I read that Cadbury approved the Kraft Foods takeover of the company, and the final offer was worth $18.9 billion, an improved bid from the previous $17.1 billion proposal. In my view, they are overpaying by around $8 billion.
Intrinsic Value Estimator and Calculator - freeware for Windows XP and Vista. [View instapost]
Now free and updated, the Intrinsic Value Estimator posted here can give you a reasonable estimate of Kraft, KFT.
www.frips.com/markets.htm
Book Review: Bruce Greenwald's Value Investing Does a Great Job Teaching Readers [View article]
I also enjoyed reading about the other approaches to value investing in the back third of Professor Greenwald's book.
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
Takemura,K. 1992 Effect of decision time on framing of decision: A case of risky choice behavior. Psychologia, 35,180-185. (In English)
Takemura,K. 1993 The effect of decision frame and decision justification on risky choice. Japanese Psychological Research, 35, 36-40.(In English)
Takemura,K. 1994 Influence of elaboration on the framing of decision. Journal of Psychology, 128, 33-39. (In English)
Takemura,K. 1994 An theoretical explanation of the framing effect: Contingent focus model of decision making under risk. Japanese Psychological Review, 37, 270-291.(In Japanese with English abstract)
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
Takemura,K. 1992 Effect of decision time on framing of decision: A case of risky choice behavior. Psychologia, 35,180-185. (In English)
Takemura,K. 1993 The effect of decision frame and decision justification on risky choice. Japanese Psychological Research, 35, 36-40.(In English)
Takemura,K. 1994 Influence of elaboration on the framing of decision. Journal of Psychology, 128, 33-39. (In English)
Takemura,K. 1994 An theoretical explanation of the framing effect: Contingent focus model of decision making under risk. Japanese Psychological Review, 37, 270-291.(In Japanese with English abstract)
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
Jake,
Thanks for a balanced and critical review. The Buffett and Munger innovation was in how they "framed" their investing decision before making it. The liberal use of quotes (which Mr. Buffett approved) was intentional... so that the reader would feel that he was listening to Buffett and not the author Labitan.
I tried to hide my own biases; but a little leaked out in the SOAP process described in chapter 3. The intent there was to show the reader that we can form a general impression of managers using both feelings and facts... using both subjective and objective data.
Here is an old audio clip of Mr. Buffett mentioning the 4 decision filters: [frips.com]
I think the key to appreciating the filters as I do, is to imagine what each of the 4 clusters really represent. 1. Develop an understanding of the economics of the business and its products. 2. SCA is really about Customers. 3. ATM, Able and Trustworthy Managers and 4. Ben Graham's Margin of Safety by buying below Intrinsic Value.
If we give credit to Ben Graham for filter four; then the real advance of the Buffett+Munger collaboration is in "U+SCA+ATM."
Here is an audio that hints at their "growth" in learning towards finding the "wonderful business." [frips.com]
Before we find the "wonderful business," look at the wonderful runner. Imagine a marathon runner and additive factors this way... endurance + strength + determination + experience will probably beat the runner with only endurance + determination.
I hope this explanation helps your readers appreciate the Buffett and Munger innovation of combining 3 qualitative steps with 1 quantitative step... in order to have a higher probability of a better outcome.
Bud
Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance) [View article]
Jake,
Thanks for a balanced and critical review. The Buffett and Munger innovation was in how they "framed" their investing decision before making it. The liberal use of quotes (which Mr. Buffett approved) was intentional... so that the reader would feel that he was listening to Buffett and not the author Labitan.
I tried to hide my own biases; but a little leaked out in the SOAP process described in chapter 3. The intent there was to show the reader that we can form a general impression of managers using both feelings and facts... using both subjective and objective data.
Here is an old audio clip of Mr. Buffett mentioning the 4 decision filters: [frips.com]
I think the key to appreciating the filters as I do, is to imagine what each of the 4 clusters really represent. 1. Develop an understanding of the economics of the business and its products. 2. SCA is really about Customers. 3. ATM, Able and Trustworthy Managers and 4. Ben Graham's Margin of Safety by buying below Intrinsic Value.
If we give credit to Ben Graham for filter four; then the real advance of the Buffett+Munger collaboration is in "U+SCA+ATM."
Here is an audio that hints at their "growth" in learning towards finding the "wonderful business." [frips.com]
Before we find the "wonderful business," look at the wonderful runner. Imagine a marathon runner and additive factors this way... endurance + strength + determination + experience will probably beat the runner with only endurance + determination.
I hope this explanation helps your readers appreciate the Buffett and Munger innovation of combining 3 qualitative steps with 1 quantitative step... in order to have a higher probability of a better outcome.
Bud
Book Recommendations by Gates, Buffett and Munger [View article]
In my view, Buffett and Munger advanced the area of "decision framing" and outlined a sensible approach to valuation by including all the important stakeholders in a four "decision cluster" process.
"The Four Filters Invention of Warren Buffett and Charlie Munger" paperback is available from Amazon.com and the audio cd version is available from Lulu.com here: www.lulu.com/content/5...
Here is a short audio clip for your readers to review. And, pay special attention to the last minute of the audio. It is a bit scratchy, but careful listeners will appreciate its historical significance.
frips.com/4m.mp3
Bud Labitan
frips.com
The "Four Filters" of Warren Buffett and Charlie Munger [View article]
"The Four Filters of Warren Buffett and Charlie Munger" is now available on the Amazon Kindle Reader here: www.amazon.com/dp/B001...
The Paperback is available here: www.amazon.com/dp/0615...
And, the 70 minute abridged audiobook cd is available here: www.lulu.com/content/5...
Enjoy !
The "Four Filters" of Warren Buffett and Charlie Munger [View article]
My book is now on audio cd here: www.lulu.com/content/5...
Runtime=70 minutes. Read by the author.
This is the abridged version of the book: "The Four Filters Invention of Warren Buffett and Charlie Munger".
This book examines each of the basic steps Buffett and Munger use in "framing and making" an investment decision. It is a focused look into an amazing invention within "Behavioral Finance."
I hope you like it!
Bud Labitan
frips.com
www.lulu.com/content/5...