Roger Montgomery - Value.Able thoughts?

[WTC]

Rogers book is 1 page short, he needed to include a fully worked example on Intrinsic Value including how to calculate IT value in the years ahead.
I went to a presentation last week in Chatswood to hear Roger speak, he told us he valued TLS at around $2-30/2-50, I did the calculations from morningstar info step by step from the book and got $3.68!
It looks as though I wasted $45, if any one has the book, have you done a IT value on TLS from the 2010 figures? If so, what did you get?
Your input would be greatly appreciated as I am mighty frustrated to get a so called simple equation so wrong.

 

[robusta]

Rogers book is 1 page short, he needed to include a fully worked example on Intrinsic Value including how to calculate IT value in the years ahead.
I went to a presentation last week in Chatswood to hear Roger speak, he told us he valued TLS at around $2-30/2-50, I did the calculations from morningstar info step by step from the book and got $3.68!
It looks as though I wasted $45, if any one has the book, have you done a IT value on TLS from the 2010 figures? If so, what did you get?
Your input would be greatly appreciated as I am mighty frustrated to get a so called simple equation so wrong.

The thing to understand with future valuations is there is a fair bit of art involved. You have to rely on analyst forecasts of ROE, equity per share, net profit and shares on issue.
As for the valuation of TLS either you or Roger may be right there are so many variables you need to factor in it would suprise me if your valuation matched Rogers.

http://www.businessspectator.com.au...governm-pd20100923-9K52A?OpenDocument&src=sph

Personally I would not bother working on TLS valuations as it is not the type of business I would like to own.

I think Roger admits in the book that valuations are not perfect but to quote Charlie Munger when asked why he was such a succesful investor "because my guesses are better than yours"

 

[Cakeman]

Thanks ROE.



- he doesn't reveal the exact method he uses to value stocks. He gives you a "leg up" but doesn't give away his whole method. Use what he gives you and then research some of the things I mentioned above.
- finding all the raw data you need to use Roger's calculations is not easy. Most of it you can find if you dig around enough. I find the hardest numbers to find are a broker's forecast of future NPAT and future total equity.

If you know where to find those two numbers let me know

I agree. I purchased the book as well. Whilst i though it was informative, it was hyped up to have his valuation methods explained. While it is touched on over 5-10 pages, i would not say that it is well explained and does lack a lot of information on the formulas

The other problem is finding the raw data (as mentioned above) it is not an easy task and i have access to a few sites with detailed figures.

I think this book is a segway to Roger possibly releasing a subscription based web site which values companies with his formula.

All in all, cant say i am too impressed

 

[ubtheboss]

Rogers book is 1 page short, he needed to include a fully worked example on Intrinsic Value including how to calculate IT value in the years ahead.
I went to a presentation last week in Chatswood to hear Roger speak, he told us he valued TLS at around $2-30/2-50, I did the calculations from morningstar info step by step from the book and got $3.68!
It looks as though I wasted $45, if any one has the book, have you done a IT value on TLS from the 2010 figures? If so, what did you get?
Your input would be greatly appreciated as I am mighty frustrated to get a so called simple equation so wrong.

Hi WTC,

I agree with everyone who has posted after you.

However I decided to take on the challenge of working the numbers on TLS for my own sake as well as yours and others.

I noticed that the numbers quoted around the net- from Commsec, to AFR, to their annual report- for the raw data we need varies. The annual report should always be your first stop but I even noticed them using numbers they shouldn't have for calculating ROE.

Anyway, the biggest son of a bitch is finding raw data forecast numbers on NPAT and ending equity I have found. Sorry but I got fed up and I'm not going to try forecasting 2011. HOWEVER I did do intrinsic valuations for 2009 and 2010. When you see these numbers you may better understand Roger's estimate.

NB:
I used for 2009
- EqPS 0.998; POR 0.856; ROE 33.3 (or 32.5% in his Tables)
I used for 2010
- EqPS 1.02; POR 0.895; ROE 31.3 (or 30% in his Tables)

10% RR
EOFY 2009- 3.97
EOFY 2010- 3.51

12% RR
EOFY 2009- 3.17
EOFY 2010- 2.84

14% RR
EOFY 2009- 2.65
EOFY 2010- 2.38

You can see the trend is down sp-wise. TLS itself says in it's annual report that it sees 2011 EBITDA declining by a high single digit percentage. If you take that to be 9% (to be conservative) and you treat TLS as a risky stock worthy of a 12-14% margin of safety then you can see around about how Roger got a $2.30-2.50 IV.

It depends on what 2011 NPAT and ending equity forecast numbers he used. Finding that info on the net is nearly impossible unless some kind soul publishes a broker's report pdf to the net and you find it via Google.

Never say die though!

Anyway, that's a lot of info and I hope it helps. It helped me just crunching the numbers and putting it to paper and thinking through it. Seems us 'Roger Readers' need our own support forum to help us fill in the gaps he left for us. So far this forum is the best I've found so I thought I'd contribute.

As others have said here, forecasting a share price is not just about putting numbers into a formula. What Roger has given us IS a massive help but I think we also need to look closely at other things like debt, cash flow, management etc.

I do feel Roger was leading us to believe he was giving us HIS method and that the raw data was easy to find. To see him then say on his blog that "he doesn't use that formula exactly" or on Facebook that "yes, the raw data is hard to find but he pays for his" seems dodgy.

Oh well, I know more now then I did so I'll stop complaining and just work even harder to educate myself.

Good luck!

Phew...sleep i must

 

[WTC]

Thank you so much for your replies.

UBthe boss, I used 10% for my calculation in 2010 to get $3.68, I see you got $3.51, that at least tells me I am not doing anything drastically wrong.

I just think he could have been more diligent on this section on Intrinsic Value, after all on the front page he says the following "How to value the best stocks", not to get the valuation wrong by 33%%!

I feel the book fails to deliver on its promise, it is so subjective, I think Roger in a new edition would address this all so important chapter differently.

Would I recommend it? No, I have plenty of books on trading/investing I thought this was going to give me something concrete, not leave me scratching my head.

 

[Cakeman]

Valu.able may be trading above it's intrinsic value by as much as 75%. With no substantial year on year profits and a declining ROE I rate it as a C5

 

[theog]

I watched one of Roger's podcast from the asx website and was keen to try and apply his intrinsic value calculation.

I found it really hard to source some of the company information. Or at least found it a very manual task. Going through each years annual report from the asx announcements and gathering the information is not my idea of fun.

Surely historical company figures are aggregated and available online. I just cant find a site that has this information. For example finding the EBIT for the last ten years for Woolworths.

I'm guessing this is a paid service? Can someone guide me to the right place?

Theo

 

[rockhound308]

I have to admit is still haven't finished the book. I guess i have to admit i don't have the patience for investment books or Rodgers long term value investing, but his valuation technique is still defiantly has its uses for assessing companies for my type of trade.

Its a pitty Rodger is so cagey/touchy about the formulas for the tables in the book. I thought that was what i was paying for in the book, see the deleted posts on his web site, search google web archives.

The table for the company that retains no earnings is simply Requited Rate of Return / ROE, any one have any thoughts on the other table where company retains all earnings??

I use data from westpac online trading (morning star) and cut and paste to a spreadsheet, takes about 20 seconds, the other online brokers have similar.

rockhound

 

[ubtheboss]

I've been having some trouble finding raw data to use Roger's formula but between help on this forum (thanks ROE) and on Roger's blog I found out how to:

calculate NPAT:

Since E(arnings)PS= NPAT/share oustanding

NPAT= EPS x Shares outstanding

So if you look on your broker's website (e.g. I use Commsec) you can see historical info for a company's # of shares on issue and forecast EPS (if the company is big enough) and simply multiply the two. You will obviously have to keep an eye out during the year for any changes in either variable.

calculate forecast EqPS (equity per share):

Forecast Year Equity Per Share = Previous Year Equity per share + Forecast Earnings per share – Forecast dividends per share + new share capital(per share) – buybacks(per share)

e.g. for Telstra

2010 EqPS= 1.02
2011 (F) EPS= 0.274
2011 (F) DPS= 0.28
New share cap= no change
Buybacks= none

You do the math

Hope that helps. It sure helped me!!

 

[robusta]

Rogers book is 1 page short, he needed to include a fully worked example on Intrinsic Value including how to calculate IT value in the years ahead.

This is a link to Rogers blog with a worked example of future intrinsic value.

http://blog.rogermontgomery.com/how-do-value-able-graduates-calculate-forecast-valuations-2/

Also a link for finding source data on Comsec, ETrade and Westpac

http://blog.rogermontgomery.com/wp-...the-Source-Data-for-Value.able-valuations.pdf

 

[So_Cynical]

This is a link to Rogers blog with a worked example of future intrinsic value.

http://blog.rogermontgomery.com/how-do-value-able-graduates-calculate-forecast-valuations-2/

Also a link for finding source data on Comsec, ETrade and Westpac

http://blog.rogermontgomery.com/wp-...the-Source-Data-for-Value.able-valuations.pdf

Thanks for the links...interesting reading, first time ive seen him on TV and first time ive seen his blog, i like him and good to see he's interested in some of my portfolio stocks.

 

[WTC]

On Rogers blog he has given a worked example on how to calculate IT going forward, should answer most questions.

 

[ubtheboss]

If you have already read Roger's book and are now a student of his method for forecasting share price via 'intrinsic valuation' (which was derived from Warren Buffet's methodology) I have set up a new thread:

https://www.aussiestockforums.com/forums/showthread.php?t=20847

That thread is geared towards posters helping other posters with their 'Roger homework', exchanging ideas about sourcing raw data, comparing calculations, etc. (vs. the original 'book critique' theme of this current thread- no disrespect intended).

Cheers

 

[MrBoJangles]

Hi all,
Here is something for you Roger fans to play with.

http://tdserver2.com/cgi-bin/start.cgi/apps/bourse/login1.htm

You can login for a play with:
LoginName: demo and Password: demo

Inspired by Roger, I have only changed one thing, and that is the A1-C5 rating business, and simplified it to just a 0-5 rating system. I could be convinced to go the A1-C5, but not sure it's really a plus.

There will be a web site up shortly re this web application, and your comments on the app re amendments, improvements will be very welcome.
Private subscriptions will be available - maybe just asking for a donation or something..

Regards,

Mr Bo

 

[stumacd]

Hi everyone,

I have a value stock screener that calculates the IV (for RR 10-16) and allows you to filter out unwanted stocks.(eg. where debt/equity > 20%)

asxvaluescreener.heroku.com/records

The IVs that it produces are very similar to Roger's, but the data can sometimes be inconsistent. So ensure that you verify any figures yourself.

I'm still working on it, there's a few features that will be handy, mainly an email when a stock hits my RR's safety margin, meaning that I can get the value stocks before everyone else

Let me know if there's anything that you think I should add.

Cheers,
Stu

 

[Sirloin Steak]

I used to follow Roger until I tried out the "stockval" program he recommended and the data hadnt been updated meaning that I lost cash,

He's got interesting formulas but looking at the company he used to run "Clime Capital" and his returns do they really work?

IMO he's a little bit of a cowboy value investor tinkering and trying to come up with the next big thing.

Hopefully this criticism will be constructive

 

[stumacd]

I update my site regularly (so I don't miss any opportunities) and you can play with the RR to suit yourself.

I hope to add more variables to play with in the formulas for those that want them. So let me know if there's anything that you would find useful.

 

[robusta]

I used to follow Roger until I tried out the "stockval" program he recommended and the data hadnt been updated meaning that I lost cash,

Not sure if Roger has any connection with stockval. I read David McNiven's (the ceator of Stockval) book it had some good ideas but I found Stockval next to useless. I had a free trial earlier this year and the top "recomendation"
with a 80% margin of safety was a company called Quantum Energy QTM. Five minutes of digging revealed this company had been delisted a couple of times and a announcement of the CEO selling shares to pay for employee entiltements. You could not offer me a large enough margin of safety to invest in a company like this.

He's got interesting formulas but looking at the company he used to run "Clime Capital" and his returns do they really work?

All I can say is I have been following his formulas (based on Benjamin Graham, Warren Buffett and Richard Simmons) and have found the returns very satisfactory.

IMO he's a little bit of a cowboy value investor tinkering and trying to come up with the next big thing.

Hopefully this criticism will be constructive

That is the best thing about opinions - we all have one and who is to say who is right?

 

[stumacd]

Stockval is part of the climb group.
http://www.sharesguru.com/new-value...227.html?sid=1673ac1bb2d4650accf8cdefa6e326f8 (4rd post is from Roger)

I must say that Roger is pretty adamant that his formula just allows you to find stocks for further investigation. The number should just allow you to avoid businesses with bad fundamentals or that have been hyped up.

 

[robusta]

Stockval is part of the climb group.
http://www.sharesguru.com/new-value...227.html?sid=1673ac1bb2d4650accf8cdefa6e326f8 (4rd post is from Roger)

I must say that Roger is pretty adamant that his formula just allows you to find stocks for further investigation. The number should just allow you to avoid businesses with bad fundamentals or that have been hyped up.

David McNiven who wrote A Wonderful Company at a Fair Price developed Stockval, Clime bought the right to the program. Like I say the book was good but my short experience of the Stockval website found a lot of the companies were not wonderful, a bit like the The Intelligent Investor Website, good idea but I would not invest in 90% of the companies they recommend.