*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video: How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example) ua-cam.com/video/BysGX3ZgLFU/v-deo.html
as you said, in revised scenario as well, acceptable buy price is less than intrinsic value but how cone its sell option?? or the formula should be current price < acceptable buy price???
Oh thanks ... been spinning my wheels for half an hour trying to unwind what my discrepancy was! I was going to comment, but you've already found the problem.
This video is amazing! nice job! do you know if there is a way to manually calculate your own growth rate pulling the historical data into the sheet? many tks! PS: I made a concatenate function that actually gives the complete yahoofinance link straight into the analysis tab.. easy but effective since you click on the cell and the page magically opens in the right place. scroll down, boom, done.
11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price. If Current Price
Yeah, you're right. He should be comparing the estimated intrinsic value to the actual current share price in F26. Also, in reality, you probably wouldn't wait to sell until the stock goes 65% above its intrinsic value. If you sell if it goes say 20% above intrinsic value then the condition should be something like: IF (F26 < F29, “Buy”, IF (F26>(F23*1.2), “Sell”)
I believe that's correct as well. I also noted that the "Difference" calculation is not used in the buy/sell determination. Perhaps it's just an interesting statistic.
@@firsargentum5920 this is to decide rather to buy or not. Once you buy you shouldn’t be looking to sell if you have done your homework for that company.
@@brandyharding7692 You can also use it as a guide to sell if you think the rationale for buying not longer holds, one of which could be that the stock has run up too much and has become overvalued. In any case, the substantive point is that the formula he gave for deciding on the Buy decision is wrong - I'm sure the OP understands the math and probably just effectively made a "typo" :)
Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!
Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.
@@jle92708 speculation Is a term used in investing to distinguish a value approach based on the analysis of a businesses financials. Speculation is reviewing the stock charge and betting that it will go I do agree that investing requires speculation, though taking a value approach and deeply analyzing a business is using realized data to make more accurate predictions. There are no guarantees of course, but there ways to invest that isn’t just placing a bet because you feel like you can make money
The „intrinsic“ value in Graham‘s book refers to the value of the company’s assets. That is: take all the assets (not including any non-tangibles) and add them up (take depreciation into account). deduct all liabilities and divide the total of both by the shares. this gives you the value of a share should the company have to be liquidated. remember that graham lived 1929. then include a 20% safety margin and then you have the value to compare the current price to. Obviously this does not carry as much weight anymore as tech companies have little assets compared to there intellectual properties. But it is a conservative way of valuation for production companies with little intellectual properties.
This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS). If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83). Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83). In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.
you can just automate this. as per the formula, you can acutally lookup the EPS and other numbers. Download the Script names you want to analyze, and create a dropdown of the scipts. so everytime you select the script, it will give the IV. should not take more than an hour to create this for all 4000 stocks.
Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.
@FakeSparrow-lu5ih unfortunately it's a well kept secret by anyone who has the formula. They're unique to the individual depending on the formula. I suggest really diving in and learning as much as you can about the topic. But on our levels, his quote "buy good companies and do nothing" works well.
Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.
Thank you for this. I've wanted to find a IV calculator for Graham for a while. I now officially have three different methods for calculations!🤣 1. Multiple of earnings 2. Discounted Cash Flow and now 3. Grahams. However, since I follow so much of Graham's teachings I think I'll explore this model.
When you use these different methods of calculating IV, do they give close to the same results, or are there big differences between them? If there are big differences between them, which method do you think has turned out to be more accurate?
Hello! if I want to calculate a stock bases in Mexico the Average yield aaa bond changes and what else? Besides the obvious. And the value should be in mexican pesos or us dollars?
It's funny that the entire valuation is based on "expected growth rate over 5 years" which is forecast by a group of investors. My concern is that there is a massive reliance on other people's idea on the shares future value. Would have thought that this reliance defeats the entire point of the valuation. Can anyone confirm how this 5 year growth rate is calculated by the brains trust?
You need to apply some discipline on the units of the parameters in the model. For example, g is a %. It's better to plug in 0.1793 in Excel and format as %. A reality check - is a stock really worth $388 when it generates $5.11 per year?
In your formula for checking if the stock is buy or sell in 10:43, the answer will always be BUY because always will F29 be less than F23 because F29 is a product of percentage(Margin of error) to the F23. Is this formula really correct?
Thanks a lot. It was very well explained. I also find that the original formula is too agressive. I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy. To decide if you want to sell you should create a different model, where you incorporate your "pain-level".
Just wondering.. In the Buy/Sell recommendation...should we compare Acceptable buy price with Current price ? in the video suggested at 10:57min.. its compared Acceptable buy price with Intrinisc value..
Are you sure at 10:50 in the video the Buy/Sell comparison is being done correctly? Should you be comparing the current price to the Acceptable Buy Price?
Good evening. I have a question...is the 8.5 or 4.4, and the growth rate percentages? I noticed a lot of growth rates are in percentages. For instance one growth estimate was 101.42 % So do I have to change that to 1.0142? Also, your examples, are 8.5 percentages? If they are do I need to change them to .085 or .044? i am really excited about this formula but just am confirming...especially with the growth estimate of 101.42...does that need to be changed or not. Thanks so much.
Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.
Thanks for the fine video. If 4.4% was used by B. Graham as the average AAA corporate bond rate, how old is that, and should it be updated and if so how? Thanks...
10:46 you make the buy or sell if statement: if the acceptable buy price is less than the intrinsic value buy else sell. But you calculated the acceptable buy price by multiplying 0.65 with the intrinsic value. Shouldn't it be: If current price is equal or smaller than acceptable buy price buy else sell??? I was very confused here. The way you put the buy/sell together it will always want to buy.
Thank you for the video! This helps me a lot! I have a question. If I am doing the calculations with a company that has a negative EPS, and I, therefore, get a negative intrinsic value, what should I do? This seems to throw off my results
I think there is a mistake or im confused lol. Your acceptable buy price is .65*Intrinsic value. Which means that the buy price is always lower than intrinsic. So your last sell will always say "BUY". Shouldnt you compare to current price?
great video! just the Buy/Sell part did not make sense. at 10:44, you mentioned if the acceptable price is lower than the intrinsic value (which always will be the case after applying the safety margin) then buy. Guess it should be if the acceptable price is higher than the current price then you should buy.
This is really well explained. Have you created one where you compare an individual stock intrinsic value to just buying an 8% ETF rather than bonds. They weren't around in Graham's time, otherwise I'd think he'd use this higher earning option to compare.
There is an error on the formula at the bottom of the sheet. The current formula SHOULD be comparing the acceptable buy price to the current price. Currently it compares Intrinsic and so will ALWAYS show "BUY". Also, this formula only says buy or sell. There is no HOLD option and you wouldn't necessarily want to sell as soon as the price reaches value. You might want to sell when it's 20% over value for example. I have made a new formula based off one seen in comments to show a buy, hold and sell price ranges. =IF(F26F23*1.2),"SELL","HOLD")) Conditional formatting will then allow you to highlight the cell in colours for ease on your eyes after that formula has made them bleed.
11:33 regarding that intrinisc value, maybe one should adjust it to stock splits, as APPL was valued at 400 tbefore the last 1:4 stock split, which would mean that the stock is far ivervalued
Hello @Dividendology. Could you please reveiw your formula here for buy/sell versus your video posted on margin of safety buy/sell formula and clarify. You use current
Hi! Just some questions out of curiosity. Why multiple average yield of bonds and divide current yield? I just want to know in what sense exactly this calculation is 'the' intrinsic value. By the way, Great lesson for beginner! Thank you! 😄
For revised formula, I think the comparison is incorrect. On this one it states to compare Acceptable Price to Current price. Original formula compared acceptable buy price to Intrinsic Value. Both equations should yield a BUY
This is good, but the intrinsic value is only part of the decision. It really is only used to determine the buy price by buffet There are several other factors he talked about when making a determination on whether to buy a stock or not. I would also be careful about using future growth projections. That number can distort the IV greatly.
Very helpful, 65% margin of safety is crazy. Gotta be careful with growth rates…AAPL will not be growing 17% annually over the next 5 years so getting accurate data is crucial. Best to look at multiple sources and average them.
You did a good job in your video. But I’m from the future. November, 2023 to be exact. And for Verizon, selling short will make you rich. For Apple, buy it and hold until my time. Glad I was able to help you past humans. These lessons remind me of what Lou Rukeyser would say after getting wildly differing estimates of future markets from his guests. Paraphrasing: “One thing is certain, some of them will be wrong”.
thanks for sharing. look, what bout the growth rate? you took the 5 years as example, but there is not time function on the equation. i believe it should be relevant if you take 3 , 5 or 10 right? or im missing something.? thanks
(2x g(17%) growth) is a percentage shouldn't it be 2x .17 instead of 2x 17? Further, stocks trade at multiples so then you would need to apply a multiple to see the actual value now at 26 times earnings?
Quick question for anyone with more grey matter upstairs than myself: ------------ They Buy/Sell formula seems to only look at acceptable buy price vs. intrinsic value. What if the current price is higher than acceptable buy price, but still lower than intrinsic value. Is there a way to use a formula (IFS for example) to list buy if: - Acceptable buy price is below intrinsic value AND - current price is belowe acceptable buy price ???
Nice work. 1) Do you have a source for the revised model? 2) For high growth stocks like AAPL, it would be good to experiment with smaller growth rates (e.g. half? Some worst case historical rate) to see the impact of recessions
I applied the formulas to a few securities in today's market and ... everything is a sell. 🤦♂Is anything a buy after applying the formulas in this video? Can someone provide an example because I feel like I might have missed something in my spreadsheet even after considering the pinned comment. 😭
Great video !!! Thank you so much !! Wanted to ask if the “Y” is applicable in non us markets as well (I mean if I own a non us stock do I follow the same process to find the number you showed) and if the number “4,4” is always the same. Thanks again
When I enter that formular for fetching the EPS, google spreedshet gives me the EPS as per the last available quarter, in my case 30 June 2023, and not the TTM. In your video, however, it seems to import the TTM EPS. What am I missing?
INTRINSIC VALUE is nothing but perceived value. In this formula “ the next five year’s value” is a projected variable; therefore it comes with +- 5% error variance. So the model is as good as one’s “crystal ball” estimates.
Agree with your statement, and would take it further than +-5% in terms of error variance. As the market is quite chaotic, the projected growth by analysts over the next 5 years is only slightly better than a wild guess.
I don't see any calculation using the current price? So if the current price is higher than the intrinsic value and the acceptable price, you still should buy based on the acceptable price being lower than the intrinsic value?
The video is great and I thank you for your hard work. However, the formula for to Buy/Sell condition is a bit confusing; an acceptable buy price should compare with the current price column I believe. I have watched this video several times. Let me know what you think.
I think you are correct, while copying the formulas on my own spreadsheet, based on the formulas the acceptable buy price should always be less than intrinsic value, hence always a buy What we want to know is: Is the CURRENT price an acceptable price to buy
Hello, i have a question regarding the formula used to automate the BUY/SELL cell. If the formula in made in such a way to say BUY is the acceptable buy price is less than the intrensec value, what is the Current Price in the example for AAPL stock would have been 300$, It would still say BUY correct? Would you still BUY then? Would make sense is the formula would have been set up to say BUY is the current price is less than the acceptable BUY price? Thank you. And great video @Dividendology :)
Formula product adalah merubah ide menjadi teori dan loogika dalam bentuk formula kedalam.bentuk kimia,model dan fungsi .....formual ekonomi adalah bentuk ide utk menentukan suatu profit beban sedehananya begiti lah....
Best step by step walk through of intrinsic value calculation I've seen so far! Thanks for sharing.❤️💎 Can the bond yields be replaced by other safety instruments - say FD etc?
Thanks for your video! What if the formula contains one negative number, per example the growth rate expected for the stock. In that scenario you will have a negative intrisic value, which is impossible...what should we do?
*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video:
How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example)
ua-cam.com/video/BysGX3ZgLFU/v-deo.html
as you said, in revised scenario as well, acceptable buy price is less than intrinsic value but how cone its sell option?? or the formula should be current price < acceptable buy price???
@@aneel139 correct formula at 15:38 , look at the formula box....
Oh thanks ... been spinning my wheels for half an hour trying to unwind what my discrepancy was! I was going to comment, but you've already found the problem.
the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75
This video is amazing! nice job! do you know if there is a way to manually calculate your own growth rate pulling the historical data into the sheet? many tks!
PS: I made a concatenate function that actually gives the complete yahoofinance link straight into the analysis tab.. easy but effective since you click on the cell and the page magically opens in the right place. scroll down, boom, done.
11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price.
If Current Price
this is what i was thinking too. at 13:22 the formula changes for "acceptable buy price" as well but i'm not sure if i'm missing something
Yeah, you're right. He should be comparing the estimated intrinsic value to the actual current share price in F26. Also, in reality, you probably wouldn't wait to sell until the stock goes 65% above its intrinsic value. If you sell if it goes say 20% above intrinsic value then the condition should be something like: IF (F26 < F29, “Buy”, IF (F26>(F23*1.2), “Sell”)
I believe that's correct as well. I also noted that the "Difference" calculation is not used in the buy/sell determination. Perhaps it's just an interesting statistic.
@@firsargentum5920 this is to decide rather to buy or not. Once you buy you shouldn’t be looking to sell if you have done your homework for that company.
@@brandyharding7692 You can also use it as a guide to sell if you think the rationale for buying not longer holds, one of which could be that the stock has run up too much and has become overvalued. In any case, the substantive point is that the formula he gave for deciding on the Buy decision is wrong - I'm sure the OP understands the math and probably just effectively made a "typo" :)
Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!
Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.
Finally someone whos not speculating/gambling
Investing is speculating to an extent. The bet is to assume the market will realize the value.
@@jle92708 speculation Is a term used in investing to distinguish a value approach based on the analysis of a businesses financials. Speculation is reviewing the stock charge and betting that it will go
I do agree that investing requires speculation, though taking a value approach and deeply analyzing a business is using realized data to make more accurate predictions. There are no guarantees of course, but there ways to invest that isn’t just placing a bet because you feel like you can make money
@@jle92708 🤣🤣🤣🤣🤣
@@jle92708LOL
@@sheldor73
Whenever I want a good laugh I turn to the stock market community, there is always a large group of court jesters to lighten the mood :)
AT 10:55 the buy/sell recommendation logic should be if the price of the share is less than acceptable buy price.
Very helpful, but the Buy/Sell formula should compare acceptable buy price to current price
Agree with your point
The „intrinsic“ value in Graham‘s book refers to the value of the company’s assets. That is: take all the assets (not including any non-tangibles) and add them up (take depreciation into account). deduct all liabilities and divide the total of both by the shares. this gives you the value of a share should the company have to be liquidated. remember that graham lived 1929. then include a 20% safety margin and then you have the value to compare the current price to. Obviously this does not carry as much weight anymore as tech companies have little assets compared to there intellectual properties. But it is a conservative way of valuation for production companies with little intellectual properties.
Grahams gormula is fairly accurate, it’s just that 17% growth rate is a redicilous prediction.
This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS).
If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83).
Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83).
In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.
Absolutely agree. I think too that Buy Price = Intrinsic Value - (Margin of Safety * Intrinsic Value)
Yes, the formula is off.
You are right.
Absolutely agree, thanks for pointing out
Thank you! I was wondering if I've made a mistake because it seemed off
15:43 =IF(I30
Thank you, thought I was going mad
the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75
Great Job! Simple explanations, easy to understand. Now I just have to evaluate 4000 stocks…😊
you can just automate this. as per the formula, you can acutally lookup the EPS and other numbers. Download the Script names you want to analyze, and create a dropdown of the scipts. so everytime you select the script, it will give the IV. should not take more than an hour to create this for all 4000 stocks.
@@vishwajeetpatel3872 how do i do this? is there a video explaining the proces?
I've been searching for this spreadsheet for so long I gave up about a year ago. Somehow this came up in my feed. It's perfect! Thank you!
Awesome! I’m glad you found it!
The best explanation of Intrinsic Value of a Stock!
Thank you!
Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.
What is the formula or what is the name of it, pls let me know, thanks
@FakeSparrow-lu5ih unfortunately it's a well kept secret by anyone who has the formula. They're unique to the individual depending on the formula. I suggest really diving in and learning as much as you can about the topic. But on our levels, his quote "buy good companies and do nothing" works well.
@@FakeSparrow-lu5ih research "discounted free cash flow (DCF)"
@@kegomania thanks
probably worth stress testing that growth rate, tapering everything you can is worth seeing what the model implies as value
Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.
No. 8.5 is % as are 4.4 and Y. So it does not matter because both numerator and denominator are inflated by a factor of 100
Thank you for this. I've wanted to find a IV calculator for Graham for a while. I now officially have three different methods for calculations!🤣 1. Multiple of earnings 2. Discounted Cash Flow and now 3. Grahams. However, since I follow so much of Graham's teachings I think I'll explore this model.
I’m glad this model helps! Don’t forget about the Dividend discount model as well!
When you use these different methods of calculating IV, do they give close to the same results, or are there big differences between them? If there are big differences between them, which method do you think has turned out to be more accurate?
Hello! if I want to calculate a stock bases in Mexico the Average yield aaa bond changes and what else? Besides the obvious. And the value should be in mexican pesos or us dollars?
Listening to what you teach here is way better and more productive than sitting in a finance class for the whole year. Magnificent!
Thank you so much!!
You are a legend. Probably the most useful video I have seen in the last 5 years.
thank you!!
Hi great video, just Quick question, why the growth rate (2g) in the formula not in the percentage ( 17.93%). Thanks
It's funny that the entire valuation is based on "expected growth rate over 5 years" which is forecast by a group of investors. My concern is that there is a massive reliance on other people's idea on the shares future value.
Would have thought that this reliance defeats the entire point of the valuation.
Can anyone confirm how this 5 year growth rate is calculated by the brains trust?
This changes completely the valuation. I think it should be in %.
For UK users, prefix the ticker with LON: and divide current price by 100 (p)
You need to apply some discipline on the units of the parameters in the model. For example, g is a %. It's better to plug in 0.1793 in Excel and format as %. A reality check - is a stock really worth $388 when it generates $5.11 per year?
In your formula for checking if the stock is buy or sell in 10:43, the answer will always be BUY because always will F29 be less than F23 because F29 is a product of percentage(Margin of error) to the F23. Is this formula really correct?
See the pinned comment! Thanks!
Thanks a lot. It was very well explained.
I also find that the original formula is too agressive.
I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy.
To decide if you want to sell you should create a different model, where you incorporate your "pain-level".
Great thoughts. I agree!
I should have learned this a long time ago, but I don’t recall call this in my 1969 Business management class. Good work!
Very good video to understand the Intrinsic value of a stock and other important points to keep in mind before buy/ sell of stocks
I use 1.5 growth and have a table based on the average of the top 10 stocks in that industry divided by 2.
Best explanation I’ve seen on UA-cam so far. I probably will have to watch this a few times but I appreciate it.
Thank you!
Just wondering.. In the Buy/Sell recommendation...should we compare Acceptable buy price with Current price ? in the video suggested at 10:57min.. its compared Acceptable buy price with Intrinisc value..
it make sense to compare Acceptable Buy price comparison with Current price.. other wise there is no role for current price in decision making
see the description! :)
Are you sure at 10:50 in the video the Buy/Sell comparison is being done correctly? Should you be comparing the current price to the Acceptable Buy Price?
see pinned comment
Hi that’s was very helpful just one confusion I guess you have done a minor mistake in IF formula.
Good evening. I have a question...is the 8.5 or 4.4, and the growth rate percentages? I noticed a lot of growth rates are in percentages. For instance one growth estimate was 101.42 % So do I have to change that to 1.0142? Also, your examples, are 8.5 percentages? If they are do I need to change them to .085 or .044? i am really excited about this formula but just am confirming...especially with the growth estimate of 101.42...does that need to be changed or not. Thanks so much.
Had the same observation. Multiplier i think should be 0.1793 instead of 17.93?.
This formula is available to literally everybody. You can be more than sure it won’t be working for retail. Not a chance.
Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.
Your lessons help me improve my trading strategy. Thank you for your expertise and experience!
If the Growth Rate is a percentage, shouldnt it be listed in decimals? i.e. 0.1793?
The video is misleading, but there are some who will believe it.
That threw me too. I need to read the book I guess. Another factor in the text?
with the current corporate AAA BOND yeild of 4.6 does your forumula explained still work?
Thats true.. Because every stock is overvalued
Thanks for the fine video. If 4.4% was used by B. Graham as the average AAA corporate bond rate, how old is that, and should it be updated and if so how? Thanks...
10:46 you make the buy or sell if statement: if the acceptable buy price is less than the intrinsic value buy else sell. But you calculated the acceptable buy price by multiplying 0.65 with the intrinsic value. Shouldn't it be: If current price is equal or smaller than acceptable buy price buy else sell??? I was very confused here. The way you put the buy/sell together it will always want to buy.
Error. see the description! :)
Amazing playlist! Has exactly what I am looking for, thank you!
Thanks for the formula it's very helpful, but how do you modify the buy sell rating to check that the acceptable buy price is above the current price?
10:55 - I think you compare acceptable buy price with current prince, not intrinsic value :). Thanks for the vid, though!
Thank you for the video! This helps me a lot! I have a question. If I am doing the calculations with a company that has a negative EPS, and I, therefore, get a negative intrinsic value, what should I do? This seems to throw off my results
yeah in the same situation
If the gwoth rate is negative. How do you calculate?
How do you factor in stock splits? Assuming there hasn’t been any stock splits, wouldn’t the results be quite different?
Question: Y value is easy to track for US Markets. How do we find Y value for non-US markets? TIA
Great Job!!!!
Thank you and very good luck with your channel. Keep up with sharing good content
I wish this video explained what these terms mean and why they're relevant.
Do you have any back testing data on these models?
Need to calculate the value of the company's assets and cash versus its value in current shares
I think there is a mistake or im confused lol. Your acceptable buy price is .65*Intrinsic value. Which means that the buy price is always lower than intrinsic. So your last sell will always say "BUY". Shouldnt you compare to current price?
5:40 if 2g = 2, then where is 17.93 growth rate data gonna be used in this formula?
great video! just the Buy/Sell part did not make sense. at 10:44, you mentioned if the acceptable price is lower than the intrinsic value (which always will be the case after applying the safety margin) then buy. Guess it should be if the acceptable price is higher than the current price then you should buy.
see pinned comment
This is really well explained. Have you created one where you compare an individual stock intrinsic value to just buying an 8% ETF rather than bonds. They weren't around in Graham's time, otherwise I'd think he'd use this higher earning option to compare.
Yahoo finance does not show "5 years growth estimates", could you let me know how I can get the 5 years growth estimates?
There is an error on the formula at the bottom of the sheet. The current formula SHOULD be comparing the acceptable buy price to the current price. Currently it compares Intrinsic and so will ALWAYS show "BUY". Also, this formula only says buy or sell. There is no HOLD option and you wouldn't necessarily want to sell as soon as the price reaches value. You might want to sell when it's 20% over value for example.
I have made a new formula based off one seen in comments to show a buy, hold and sell price ranges.
=IF(F26F23*1.2),"SELL","HOLD")) Conditional formatting will then allow you to highlight the cell in colours for ease on your eyes after that formula has made them bleed.
When the intrinsic value is less than the current stock price does the formula still work?
11:33 regarding that intrinisc value, maybe one should adjust it to stock splits, as APPL was valued at 400 tbefore the last 1:4 stock split, which would mean that the stock is far ivervalued
Ofc you have to update the EPS then...
Thank you for the instructional video. Very helpful. Is the growth rate coming from EPS, P/E or something else?
Academic formula for growth rate is retention ration * ROE ... Retention Ration is 1 - Dividend Yield
Hello @Dividendology. Could you please reveiw your formula here for buy/sell versus your video posted on margin of safety buy/sell formula and clarify. You use current
See pinned comment
Thank you for actually showing how to calculate it
What relation does bond yield and stock price possess ?
For some reason, my IF function is not working appropriately and I have tried several times with both of your examples. Any recommendations?
Your investment is equal to prise * time* rate of interest devideded by hundred is equal to your interest out put ,, devidents only account pay only
Hi! Just some questions out of curiosity. Why multiple average yield of bonds and divide current yield? I just want to know in what sense exactly this calculation is 'the' intrinsic value. By the way, Great lesson for beginner! Thank you! 😄
I was thinking the same thing
Thank you for making coding so much simpler.
Glad it was helpful!
For revised formula, I think the comparison is incorrect. On this one it states to compare Acceptable Price to Current price. Original formula compared acceptable buy price to Intrinsic Value. Both equations should yield a BUY
Why is P/E no growth a constant, Shouldn't it be different for different stocks?
This is good, but the intrinsic value is only part of the decision. It really is only used to determine the buy price by buffet There are several other factors he talked about when making a determination on whether to buy a stock or not. I would also be careful about using future growth projections. That number can distort the IV greatly.
How do you suggest dealing with negative EPS or negative Growth? For example, currently BA and DOW.
Very helpful, 65% margin of safety is crazy. Gotta be careful with growth rates…AAPL will not be growing 17% annually over the next 5 years so getting accurate data is crucial. Best to look at multiple sources and average them.
its 65% of the intrinsic value ie 35% margin of safety in the example, he is just phrasing it incorrectly
Very helpful thank you. Where does the revised formula come from though?
You did a good job in your video. But I’m from the future. November, 2023 to be exact. And for Verizon, selling short will make you rich. For Apple, buy it and hold until my time. Glad I was able to help you past humans. These lessons remind me of what Lou Rukeyser would say after getting wildly differing estimates of future markets from his guests. Paraphrasing: “One thing is certain, some of them will be wrong”.
thanks for sharing. look, what bout the growth rate? you took the 5 years as example, but there is not time function on the equation. i believe it should be relevant if you take 3 , 5 or 10 right? or im missing something.? thanks
The Yahoo data is per annum, like the bond rate. What was odd was out-of-the-blue multiplying it to get an 18x growth rate?
(2x g(17%) growth) is a percentage shouldn't it be 2x .17 instead of 2x 17? Further, stocks trade at multiples so then you would need to apply a multiple to see the actual value now at 26 times earnings?
Interesting calculations, thanks for sharing
Shouldn't the buy sell "if" function be based on the margin of safety rather than intrinsic value?
Quick question for anyone with more grey matter upstairs than myself:
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They Buy/Sell formula seems to only look at acceptable buy price vs. intrinsic value.
What if the current price is higher than acceptable buy price, but still lower than intrinsic value.
Is there a way to use a formula (IFS for example) to list buy if:
- Acceptable buy price is below intrinsic value AND
- current price is belowe acceptable buy price
???
Nice work. 1) Do you have a source for the revised model? 2) For high growth stocks like AAPL, it would be good to experiment with smaller growth rates (e.g. half? Some worst case historical rate) to see the impact of recessions
Apple is not high growth
@@saulpizarro4684 just answer the question
Rick will lose his money because he thinks he’s buying a little ticker symbol and that he can forecast “growth rates”.
I applied the formulas to a few securities in today's market and ... everything is a sell. 🤦♂Is anything a buy after applying the formulas in this video? Can someone provide an example because I feel like I might have missed something in my spreadsheet even after considering the pinned comment. 😭
Great video !!! Thank you so much !! Wanted to ask if the “Y” is applicable in non us markets as well (I mean if I own a non us stock do I follow the same process to find the number you showed) and if the number “4,4” is always the same. Thanks again
GREAT VIDEO! You earned a new subscriber, THANK YOU!! 👍
You sir, have lots of intrinsic value. This is perfect, thank you
Wow, thank you!
What if we use fcf per share instead of eps?
When I enter that formular for fetching the EPS, google spreedshet gives me the EPS as per the last available quarter, in my case 30 June 2023, and not the TTM. In your video, however, it seems to import the TTM EPS. What am I missing?
INTRINSIC VALUE is nothing but perceived value. In this formula “ the next five year’s value” is a projected variable; therefore it comes with +- 5% error variance. So the model is as good as one’s “crystal ball” estimates.
Agree with your statement, and would take it further than +-5% in terms of error variance. As the market is quite chaotic, the projected growth by analysts over the next 5 years is only slightly better than a wild guess.
can you use the forward EPS instead because thats based on past quarters
Do we have any hint about when this intrinsic value price would be reached ?
How frequently do you have to update the data this formula to determine whether it is acceptable to buy or sell? Weekly? Monthly? Daily?
hey great video! Is there any websites/software you recommend out there that calculates the intrinsic value of a stock?
Yep! TickerData.com has automated sheets for this!
I'm confused, in your Graham's formula you added in the P/E as a multiplier after you input the EPS, which isn't a part of the basic formula ?
I don't see any calculation using the current price? So if the current price is higher than the intrinsic value and the acceptable price, you still should buy based on the acceptable price being lower than the intrinsic value?
The video is great and I thank you for your hard work. However, the formula for to Buy/Sell condition is a bit confusing; an acceptable buy price should compare with the current price column I believe. I have watched this video several times. Let me know what you think.
I think you are correct, while copying the formulas on my own spreadsheet, based on the formulas the acceptable buy price should always be less than intrinsic value, hence always a buy
What we want to know is: Is the CURRENT price an acceptable price to buy
Hello, i have a question regarding the formula used to automate the BUY/SELL cell. If the formula in made in such a way to say BUY is the acceptable buy price is less than the intrensec value, what is the Current Price in the example for AAPL stock would have been 300$, It would still say BUY correct? Would you still BUY then? Would make sense is the formula would have been set up to say BUY is the current price is less than the acceptable BUY price? Thank you. And great video @Dividendology :)
See pinned comment!
What happens if you took the average of both models and used those numbers?
Good video with no unecesary bs
Formula product adalah merubah ide menjadi teori dan loogika dalam bentuk formula kedalam.bentuk kimia,model dan fungsi .....formual ekonomi adalah bentuk ide utk menentukan suatu profit beban sedehananya begiti lah....
Best step by step walk through of intrinsic value calculation I've seen so far! Thanks for sharing.❤️💎
Can the bond yields be replaced by other safety instruments - say FD etc?
Thank you!
As for your question, I would have to look closer into that to find out.
Thanks for your video! What if the formula contains one negative number, per example the growth rate expected for the stock. In that scenario you will have a negative intrisic value, which is impossible...what should we do?
negative growth rates are not healthy for companies. I would advise you stay away.