BACK OF THE ENVELOPE STOCK VALUATION

BACK OF THE ENVELOPE STOCK VALUATION 

The intrinsic value is calculated using numbers from https://www.advfn.com/. 

Formula from http://www.tweedy.com document “Investing for Higher After-tax Returns”. 

 Intrinsic Value = I/D-G 

Where: I = initial cash (earnings) that you would receive 12 months from today, which will grow at some assumed compounded rate of increase to infinity 

D = discount rate 

G = the growth rate of the cash (earnings) 

Example: Johnson & Johnson (JNJ) 

Intrinsic Value 1:

Calculated using Earnings Per Share (EPS): $3.63 

Discount Rate (Large Cap US Stocks): 11% 

Growth Rate (Revenue): 8.91% 

 $3.63/.11-.0891 = $3.63/.0209 = $173.68 

 Intrinsic Value 2:

Alternate taking into Long-term Debt per share: $2.49 

 $3.63 - $2.49/.0209 = $1.14/.0209 = $54.54 

Intrinsic Value 3:

 Calculated using Free Cash Flow Per Share (FCF): $2.32 

 Discount Rate (Large Cap US Stocks): 11% 

 Growth Rate (Revenue): 8.91% $2.32/.0209 = $111.00 

 8/1/08 Closing Price: $68.10

Compare each valuation to Closing Price: $68.10

Intrinsic Value 1: $173.68 JNJ - undervalued 

Intrinsic Value 2: $54.54 JNJ - overvalued

Intrinsic Value 3: $111.00 JNJ – undervalued

Back of the Envelope Stock Valuation

Back-Of-The-Envelope Calculation - Investopedia

https://www.investopedia.com/terms/b/back-of-the-envelope-calculation.asp

A back-of-the-envelope calculation is an informal mathematical computation, ... hour, or earnings per share of a company in five years, back-of-the-envelope ...

Earnings Multilple Approach to Valuation - Dividend Monk

https://www.dividendmonk.com/earnings-multilple-approach-to-valuation/

If the company is growing its EPS each year, then in reality it will take less ... it's easy to do back-of-the-envelope calculations about stocks, easy to look at an ...

Benjamin Graham Intrinsic Value Formula - Joshua Kennon

https://www.joshuakennon.com › Business Management › Accounting & Finance

Jul 15, 2011 - Benjamin Graham one proposed a quick back-of-the-envelope intrinsic ... John owns a construction equipment company that requires him to reinvest ... G = Conservatively estimated growth in EPS for the next 7 to 10 years.

Discounted Cash Flow Analysis: Tutorial + Examples - Lyn Alden

https://www.lynalden.com/discounted-cash-flow-analysis/

The stake in the business is worth an amount of money equal to the sum of all future .... You can easily substitute free cash flow (FCF) for EPS if you want. ... It's a back-of-the-envelope calculation for fair value based on conservative estimates ...

Articles to Set-up Monthly Dividend Portfolios

Steve's Dividend Portfolio And Strategy For Replacing My Salary With ...

https://seekingalpha.com/.../4178278-steves-dividend-portfolio-strategy-replacing-sala...

May 31, 2018 - Dividend income strategy to provide a monthly income stream. ... decisions on which dividend stocks to add to my dividend income portfolio.

20 Top Stocks For A Monthly Dividend Portfolio | Seeking Alpha

https://seekingalpha.com/article/4090801-20-top-stocks-monthly-dividend-portfolio

Jul 26, 2017 - This past February, I wrote an article that utilized the selection criteria of world-class ETFs to build a portfolio of dividend-producing stocks.

How to Retire on 8% Dividends Paid Monthly - Nasdaq.com

https://www.nasdaq.com/article/how-to-retire-on-8-dividends-paid-monthly-cm837850

Aug 28, 2017 - You can certainly build your own monthly dividend portfolio, and the advantage of doing so is obvious: you can target companies that pay much ...

2018 List of All 41 Monthly Dividend Stocks Sure Dividend

https://www.suredividend.com/monthly-dividend-stocks/

See all 41 monthly dividend stocks, along with a free Excel Spreadsheet to ... is to construct your portfolio so that a roughly equal amount of dividend income is ...

Earn Dividend Income Every Week With This 12 Stock Portfolio

www.dividend.com/how-to.../earn-dividend-income-every-week-12-stock-portfolio/

Jan 4, 2018 - Stocks pay dividends monthly, quarterly, semi-annually and annually, ... a list of common stocks and REITs that would be part of the portfolio.

Retire On Monthly Dividends | - Contrarian Outlook

https://contrarianoutlook.com/retire-on-monthly-dividends/CTA081418CF

Plus my “8% Monthly Payer Portfolio” will also let you live on dividends alone—without selling a single stock to generate extra cash. And you'll get paid the same ...

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)

Fund facts

Asset class	Domestic Stock - General
Category	Large Blend
Expense ratio as of 04/25/2018	0.14% This is 85% lower than the average expense ratio of funds with similar holdings.* Save even more by investing in lower cost Admiral Shares or an ETF.
Minimum investment	$3,000 Layer opened. Minimum investment by account type Initial minimum General Account, UGMA/UTMA $3,000 IRA $3,000
Fund number	0085
CUSIP	922908306
Fund advisor	Vanguard Equity Index Group

This 4x6 index card has all the financial advice you'll ever need from Harold Pollack

Is the U6 unemployment number the one you should really pay attention to?

Probably....

Here's the breakdown according to Wikipedia.

The Bureau of Labor Statistics also calculates six alternate measures of unemployment, U1 through U6, that measure different aspects of unemployment:^[41]

• U1:^[42] Percentage of labor force unemployed 15 weeks or longer.
• U2: Percentage of labor force who lost jobs or completed temporary work.
• U3: Official unemployment rate per the ILO definition occurs when people are without jobs and they have actively looked for work within the past four weeks.^[43]
• U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
• U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
• U6: U5 + Part-time workers who want to work full-time, but cannot due to economic reasons (underemployment).

Note: "Marginally attached workers" are added to the total labour force for unemployment rate calculation for U4, U5, and U6. The BLS revised the CPS in 1994 and among the changes the measure representing the official unemployment rate was renamed U3 instead of U5.^[44] In 2013, Representative Hunter proposed that the Bureau of Labor Statistics use the U5 rate instead of the current U3 rate.^[45]

https://en.wikipedia.org/wiki/Unemployment

The Little Book of Economics: How the Economy Works in the Real World

Jack Bogle's Index Fund Portfolio and How Warren Buffett Bet that Index Fund Investing would Beat Hedge Funds

John Clifton "Jack" Bogle is known as the common sense investor. He started the first index fund in 1975 which is in my opinion the only intelligent way for most of us to invest. Our fortunes grow as the nation's fortunes grow. All while giving less money to the big investment firms and banks.

The power of the index fund method was illustrated by a bet that Warren Buffett made with hedge fund managers. Mr. Buffett bet $1 million that he would beat their returns by investing in an index fund. Warren Buffett won.[3-5.]

Below are his eight basic rules for investors:^[1]

1. Select low-cost funds
2. Consider carefully the added costs of advice
3. Do not overrate past fund performance
4. Use past performance to determine consistency and risk
5. Beware of stars (as in, star mutual fund managers)
6. Beware of asset size
7. Don't own too many funds
8. Buy your fund portfolio - and hold it

Below is his suggested portfolio along with suggestions for asset allocation based on age.[2.]

Sources:

1. Sigma Investing. Review of Common Sense on Mutual Funds.

2. http://www.npr.org/2015/10/17/436993646/three-investment-gurus-share-their-model-portfolios
3. http://www.npr.org/2016/03/10/469897691/armed-with-an-index-fund-warren-buffett-is-on-track-to-win-hedge-fund-bet
4. https://www.bloomberg.com/view/articles/2017-05-03/why-i-lost-my-bet-with-warren-buffett
5. http://www.npr.org/sections/money/2016/03/04/469247400/episode-688-brilliant-vs-boring