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Professional asset manager and individual investor. A fan of the Warren Buffett school of value investing. Heavy user of the cash flow-based valuation approach.
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  • The Facebook (FB): $30 Worth Of Expectations 0 comments
    Oct 6, 2013 3:23 PM | about stocks: FB

    Facebook is a good example of a company with aggressive expectation pricing. –°conservative cash-flow based valuation produces a value of only $15/share. The remaining $30/share is the price investors are willing to pay for the present value of yet unobservable future cash flows. Future cash flows, though, are uncertain both in terms of size and time. As a result, investors' perceptions of the future cash flows can swing dramatically depending on the prevailing news flow. While the Facebook might be appealing as a business, the fact that two-thirds of the current price is not quite real makes it a hard buy.

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: FB
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