How To Find the Intrinsic Value of a Stock like Benjamin Graham! (The Intelligent Investor)
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- čas přidán 25. 08. 2024
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Benjamin Graham is known as the father of value investing. He employed and mentored Warren Buffett for years and wrote some of the most important books ever on value investing ever, such as Security Analysis and my personal favorite investing book, the intelligent investor.
And in the book the intelligent investor, Benjamin Graham lays out a formula for calculating the intrinsic value of a stock, so in this video, Im going to be taking you step by step on how to perform this valuation and going more in depth into how this valuation model works.
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I am not a Financial advisor or licensed professional. Nothing I say or produce on CZcams, or anywhere else, should be considered as advice. All content is for educational purposes only. I am not responsible for any financial losses or gains. Invest and trade at your own risk. Some of the links in the description may be affiliate links.
Can you or someone explain what the yield of AAA corporate bonds has to do with intrinsic value of companies in the stock market? Many thanks
I am addicted to your channel and to collecting those juicy dividends
Thanks!!
Only concern I have is the use of the PE ratio, I always thought it’s best to use the industry average or the average of the 4 closest companies
Glad you highlighted how AAA yields can really affect the valuation. Seeing that shows just how much valuation can boil down to a comparison of opportunity costs, or like Warren Buffy says, bird in the hand vs birds in a bush
Capital is always choosing where to go,
This is the first video I watched on your channel. I subscribed right after I had finished this video
Thanks!!
Question. If the growth rate is 17%, shouldn’t you be using .17 as the growth rate?
I was looking forward to this!!!
The fact that some of these valuations are so far off each other tells me I should be cautious, rather than using them together to get an average. If two different models can come up with 210 and 270, something is off. I understand why more data points would be a good thing, but that's only true if they tell a coherent story.
There’s a difference between intrinsic value (liquidation value of a company) and extrinsic (lifetime future earnings of a company either imagining growth or longevity or both that may or may not materialize).
Stupid question, If I use this valuation metric for Canadian companies, what bond yields would I use?
Honestly, it's not a stupid question and I wanted to know as well.
Always use the AAA corporate Bonds, i done this with UK and EU companies
thank you so much
Great Video! thanks for sharing this with youtube :)
Thanks for watching!
What about if EPS is negative?
Then that company has no intrinsic value as such.
moment mate..at first really thank you for quality content.. but i do not understand one thing.. Microsoft is growing company, so P/E should be also for growing company and you used, the same one as for Caterpillar.. why?.. i would use P/E 20 for microsoft.. or its based on safety?..
Thanks for the video. I am using all that you've posted about valuation method, such as Benjamin's, DCF, DDM and Lynch's, which is a little more difficult to practically value the stock price though. However, I haven't been able to finish DDM model because because the Average Dividend Growth Rate of the stock that I calculated is higher than WACC. Deeply appreciate if you deal with the DDM model where Average Dividend Growth Rate is higher than WACC. Thank you again for the great video :)
That video is coming soon!!
@@Dividendology Great!! I will wait for it. :)
Hi I want to know whether Y is Current Yield of 10 years or Y is current yield of 10 years on bonds
on AAA corporate bonds in india is 4.8
Interesting...I want to check out other valuation models. This helps keep the mind active. I learned some of these rations in accounting, and finance classes. There you do not use them practically though.
For me I am finding that when I have too many single companies, I have trouble keeping track of them. I think oh this is fine one day, and the next week the stock is tanking....lol...So, I've cut down on the number of my single company stocks, but that is still in process. How many companies maximum is good for a person that still works a day job?
Very helpful video. Do you sell the sheets as a one time buy?
Sheets can be downloaded on tickerdata.com !
In Benjamin Graham's, "The Intelligent Investor," he clearly states that this formula used is a warning, showing how unpredictable the market is. It is commonly seen that most people see this as the, "Graham Formula," when in reality that is very misleading. While currently Nvidia is overvalued, the extent that this formula shows is quite extreme
Nvidia is a growth investment, graham is a value investor. Nvidia investors are betting on growth and future earnings, graham is evaluating tangible assets.
Graham used this formulae por growth stocks, but it basically boils down to using multiples for valuation. Now we can use ev/evitda, or ev/fcf, taking into account accounting standards.
Hello.Thank you for this CZcams lesson.Is there an Intrinsic Value of a stock formula for Canadian stocks that trade on the Toronto Stock Exchange?If so, can you please let me know.Sincerely,Peter
I’ll have a video on this soon.
Happy warren long live long live haha❤❤🎉🎉
I’ve been listening to the intelligent investor during my commute. While I can get my head around the Graham Formula, I keep getting hung up on how to shrink the vast number of stocks listed to those worth looking into in greater depth. Graham does have some rules on this but trying to implement them into a stock screener is beyond my abilities.
Do you have a stock screener or rules that you follow when initially seeking out stocks to invest your time into before ever considering investing financially in?
Yahoo finance has a free screener. But you have to make an account to use it.
Really great video on this topic. How would one go about using this for let's say for Canadian market or Asian market? Does the 4.4 average for USA average corp. bond rate get changed to the local market bond average rate?
Same, that is what I wanted to know as well. I'm Canadian and I purchase both USA and Canadian stocks.
basically you cannot use bonds yield 4.4 for different market (+ you should always look for a present data, cause that yield is not 4.4 anymore today), for different market you have to find different figure
Always appreciate the videos. Looked at CVS recently? Only trading at a P\FCF of 8 👀👀
On my list of videos to make!
@@Dividendology awesomeeeee. I definitely started a position
How would you use this for a stock with no EPS meaning non profitable companies?
You wouldn't. Benjamin Graham would stay away from it
hi and greetings from greece... i was wondering ,,,can we download the spreadsheet from where?
My patreon page! Link in the description!
If Y has such an influence on the stock then the intrisic value can appear artificial. If Y was 1.76% two years ago and is 4.68% now then it follows the stock was greatly undervalued then and not so much now. This method just seems too artificial to consider because the AAA corp bond is so volatile. but what do i know.
The idea is if the valuation of the stock yields less than the valuation of the bonds than you are better off buying the corporate bonds. If the bonds are not providing a yield than you are better off betting on the long term future earning potential of the company rather than accepting such a low yield.
You could even use the bond yield of the stock you are looking at itself,, but the idea is to compare investing in bonds as an asset class vs investing in a particular stock
Why the stocks at the moment the intrisic value is lower than the current price? It means I cant buy?
If the intrinsic value is under the current stock price, typically you would sell in a lot of cases. The intrinsic value tells us what stock is overvalued or undervalued. You buy when undervalued, sell when overvalued.
If the growth projection is a negative number like Pfizer’s according to yahoo, do I put the negative sign? The intrinsic value at the end becomes a negative value and I think that can’t be right
this valuation model won't work well for companies with negative earnings
If a company has a billion dollars and spends $100M a year, it will be bankrupt in 10 years. So yeah it’s negative.
But there are a lot of events that affect short term earnings and how earnings can easily misrepresent a company’s earnings potential. Graham talks about this a lot in securities analysis and explains the details of getting a better number to use than the reported eps.
Thks warren❤❤😂😂
Nice video thank you very much! It seems like Microsoft is overvalued if you the Graham's valuation, what do you think about it, can we take his valuations for the big tech stocks nowadays? I am not sure that we will see Microsoft at 120 to 150 dollars, so do we even buy it ever?
I’d argue that some companies such as MSFT and KO will almost always trade at a premium due to the quality of the business and history. It also needs to be taken into consideration that current AAA corporate bonds rates are really pushing the valuation down for companies right now.
I own both KO and MSFT in my portfolio. Still import to buy at a good price, which is why I perform multiple different valuations when analyzing a company.
@@Dividendology thank you! Do we get videos on the other valuations too? Would be awesome!
I have some older ones, but am planning on making updated ones in the near future!
@@Dividendology that would be really nice.. I want to build up a long term dividend portfolio and now I have Grahams valuation but not the other ones.. I guess I need the other ones too, to make a good valuation on the stocks
With SVB going BUST, do you think investors should wait a bit before jumping in?
I’m sitting on a larger cash position than I normally do right now.
Im trying to follow you (trying to get used to google programs more) But the EPS doesnt work, i dont think the ticker symbol thing is working? Should i download an add on?
Interesting video!
aahh for me it is (ticker; "eps") so its a ; rather than a , .... Stupid lol
Nice fix!
What if EPS is negative? Celsius for example has an EPS of -1,92, the intrinsic value i get is -106,2, and the stock is traded for 181,9. Is the company's intrinsic value of a stock 106,2 then?
If the company is losing money it doesn’t have intrinsic value.
Ok do you have a video explaining how to do Benjamin brand valuation on a piece of paper with a calculator?
AAPL intrinsic value is 84 dollars but it's current value is 180 dollars. However Warren buffet and other top inventons still buy it why is that?
tech is inflated across the board because of speculation. Thing is, the speculation is probably accurate in this case with AI in consideration.
Benjamin Graham did not use such valuations to determine the intrinsic value of the company.
Yes he did, however as looking at the comments, he provided caution because people like to take shortcuts.
Great video but your typos are atrocious
Haha it happens.