Intelligent Investments: Another Good Day

Wednesday, February 21, 2007

Another Good Day

The portfolio finished the day up 0.19% even though the S&P was down 0.14%, a nice 33 basis point out performance. The Russell 2000 did finish up .15%.

Its hard to decide which benchmark is most appropriate for my portfolio. I do own many micro cap stocks which would suggest I should use the Russell 2000. However, the mutual funds I own are most representable to the Russell 1000 Growth or maybe even the Russell Mid Cap Growth Index. Of course, I own a few larger cap stocks that are most represented by the S&P 500. When I have time, I'll have to develop a blended index that is highly correlated to my portfolio. To be continued on that....

Getty Images jumped another 7.21% and Man Sang Holdings jumped again today over 9%. TAIT again dragged down the portfolio.

1 comment:

QUALITY STOCKS UNDER FOUR DOLLARS said...: Everyone can use a good day once in a while.; January 3, 2013 at 12:23:00 PM PST

Buffett's Value Formula (?)

Warren Buffett hasn't exactly published his formula for what he calls the intrinsic value of a company, but he has dropped a number of hints. He apparently multiplies estimated future earnings by a confidence margin between zero and a hundred percent (a bird in the bush being worth 0.5 birds in the hand, and all that; bush birds are the earnings you hope for, and hand birds are the earnings you're confident will materialize). He then compares these probable earnings with something he has total confidence in, by using a U.S. treasury yield as his discount rate. In calculator form it looks like this:

This calculator doesn't use fancier math than the original one did. Its advantage is that it forces you to be explicit about your earnings expectations. It also automatically provides you with a hard-headed investment strategy: always invest in government bonds, unless you can find something else you are confident will yield more cash.

One other hint that Buffett has dropped over the years is that he can estimate value in his head in about five seconds; so whatever he does he keeps it simple, slugger.