Best and Only Way To Calculate the Value of a Stock in 2021

[@diyreef]

This is the best investing channel on KZbin, no contest. Thanks for actually teaching people about investing and not just reading analysts price targets while wearing a low cut top.

[@HrvojePelin]

Sven Carlin has a very educative channel as well. :-D

[@EthanRooshock]

Perfect explanation of this method! Thank you for this!

[@ASXInvestor]

Super clear explanation and the Thor Industries example was a great way to visualise it 👏

[@Allen-L-Canada]

Wow, it's amazing to see how the FCF4O inline with the price appreciation over 10 years! It really shows the importance of FCF4O. I think the TOUGH part is that how we estimate the growth rate to be 12.81% back in 2010.

[@TheIcelandicInvestor]

Amen brother!

[@Neil.Denize]

Great video mate, very good explanation, I agree sharesight is great especially for the keeping track of the currency differences.

[@kahliamartin503]

Cannot speak more highly of Sharesight! Great platform 👌🏻

On a side note, in your DCF you also need to adjust for net cash or debt.

[@WISERandHAPPIER]

The pricing method you use depends on the industry you are buying into. You need to use the same intrinsic value method that the big fund managers use to buy the business. Warren Buffet prices Berkshire based on Book Value, Ten Cap for some industries, EBIDTA for some industries, Pay Back Time for other industries etc etc A chance that you are using your pricing method for your circle of competence but for other investors this pricing method will not be suitable for investors with different circles of competence. As I said in my previous post better to be roughly right them accurately wrong. Phil Town has been investing for longer than you have been alive- interesting to see if you can turn 1000 AUD into 1.45million AUD in 5 years like Phil Town. Well done with Thor but time will tell on how strong there moat is if we head into a deep recession. You may be safer buying into more defensive stocks e.g. Sanderson Farms, Bank Of America, etc. I would not focus too much time on the last M as the least important of th 4. I would focus.on learning to make money on your money that is not invested in a company - You should be able to achieve over 2 % return on your money each month option trading. Option trading great if you are good at mathematics.

[@sebastianortiz861]

Wrong🤦 investing in stocks with a 50% margin of safety always wins. The reason he bought that stock is because he understands it. options trading is incredibly risky and not worth it over the long run.

[@WISERandHAPPIER]

@@sebastianortiz861 Warren Buffet does more option trading than anyone in the US. You may not understand how option trading works. I invest in shares with a 50% MOS and while I am waiting for the prices to drop I option trade. If you don't do that you could go a whole year without generating a return on your cash. For the last 10 years my option trading has consistently generated a return - not a single year have I not made money.

[@finsimple4396]

@@sebastianortiz861 Oh boy...

[@WISERandHAPPIER]

@Donny Iskandar I use Iron Condors and with practice you get used to where to place the options. Often I choose stocks that have a large number of people trading their options - I would read a heap of books and practice using a paper trading account. Practice makes perfect and always hold money back as on occasion you will make a loss but in the long run you will win more than you lose. Maybe 1 day I will teach it but still think more to be made buying awesome companies on sale and this should only be use in the interim when the market is over heated (right now).

[@WISERandHAPPIER]

Option trading the way to go right now - a crash is due in the next year or so. Check out InvestED podcast episode 167 - 18minutes 50seconds onwards "Warren Buffet one of the largest option traders in the world..."

[@hughjackson218]

Thanks for sharing info about sharesight. I just made an account and I love it! Great see see currency gains factored into my investments for once!

[@enriquerivero4051]

You are talking about the dcf, but I'd say the DDM model is simple and a powerful model to get the fair value of companies that pays dividends. What do you think?

[@danielhare2874]

Hi Hamish. Love your videos! To clarify from your previous video, you look at the qualitative attributes of a business prior to their quantitative attributes? Why in that order? Thanks!

[@Allen-L-Canada]

Hamish, what is the difference between Cash on Hand, Excess Cash, and Free Cash Flow for Owners? thanks.

[@JM0X-007]

I love that Excel OE to Share Price Comparison. Will definitely be adding it to mine 👌🏼

[@aguitarcalledchutzpah]

Hi Hamish. Ive watvhed many of your vids but never felt informed enough to make it work. Would be good if you could put together a tightly edited video how to do a start to finish analysis using a real life example. What ive seen so far has left me very confused

[@HamishHodder]

Check out the videos in my 4-step stock analysis playlist, they will help!

[@RainerArencibia]

This is a great video Hamish. Loved your simple explanation on capital allocation. Thanks for sharing. As a constructive criticism and probably due to simplicity you forgot to mention that owner earnings is after biz operation, maintenance capex, and depreciation and amortization; the last one is very important for value investors as Wall Street and most analysts don’t take this expense in consideration. This way you will arrive to a more conservative and realistic figure.

[@alialrubayee734]

another fantastic vid man! i would love a quick vid explaining your thought process when determining the range of growth rates in your spreadsheet? thanks brother!

[@Bob-yr1iz]

Thank you young man, you rock.

[@DavidMM255]

Really good explanations and video!

[@HamishHodder]

Thanks!

[@ingridgarcia3543]

Hi Hamish! I know an expirienced investor here in Spain and he says the best predictor of price is EPS(statistically speaking) . What do you think? Both(EPS and CF40) are equally good? Why not? Thanks.

[@Gwenqz]

Can you do a video to show how you would calculate future cash flow? Do you apply the same growth factor from the past 10 years?

[@MrFelipefelo]

Hamish, thanks for your videos!! Super useful and interesting! Quick question related to the video, you said that the intrinsic value of the stock is basically calculated through a DCF of the CF4O, but this calculation gets you to the company´s enterprise value, so you are considering also the portion payable to debt holders... and at the end in my opinion it is not useful to contrast it with the stock market´s price to finally make an investment desition. Am I missing something here? Thank you Again!!

[@sujonpalit3436]

Well explained

[@hugomeza2910]

Great video like always. How do you feel about the payback time method? If a great business like Thor or Apple has a payback time of 10 years or less then why not just buy it. Would you agree that the payback time method would be the most simplistic and easiest way to look at a business valuation from a cash flow for owners stand point?

[@Lhb428]

I am interested in seeing how accurate Free Cash Flow was compared to Owners Earnings. Since Free Cash Flow is more conservative than Owners Earnings, that means that FCF gives us a bigger Margin of Safety.

[@Oliverkor]

Hamish, one question I have is why is Growth CapEx not included. Are we not taking it into account when projecting future growth of the business. When we enter a growth percentage, I assume it's not just organic growth but we're assuming the business will continually expand and purchase more assets. So with this assumption, why should we discount Growth CapEx, wouldn't it make sense to include it in our calculations since this is not money distributed to shareholders, and the growth caused by those expenditures are already included in our percent projections anyway?

[@zevgestetner]

Hey Hamish, love this video, I recently performed an analysis using a DCF on Simonds (SIO:ASX) and I found its stock price to be over 50% lower than the intrinsic value. would love to hear your thoughts on it.

[@MehdiSina]

Phil Town's method doesn't allow you to buy those business with fair price. Not sure if that method work for nayone?

[@iqbalarshad5994]

Great channel! But started noticing that you just repeat the same content (repetition is not bad I guess). Wish you might cover other topics. 1) I know that using your valuation method it might be hard to value a tech startup (Shopify, Tesla, AirBnb)... but clearly the market sees huge upside in them. Can you share your insight on how to value them? 2) You should make more company analysis videos. Not for advice, it’s just great content. Companies like: MTCH, SAVE, DKNG, and afterpay (Australian) 3) More insights with industries that you are familiar with. Cheers.

[@andyweb7779]

Is the number of shares in existence in a company constant or variable?

[@Halek113]

Hamish I have a question regarding something I have trouble understanding. How can for example net profit be negative and cashflow for owner be positive or vice versa? Because I know both of these metrics are important, but apparently (especially in growth companies) net profit can be negative, but cashflow for owner can be positive.

[@andyweb7779]

I'm a noob. What's the difference between total assets, total liabilities and total current assets, total current liabilities?

[@SergiMedina]

I honestly don't like estimating growth and cash flows as it's essentially guessing and therefore speculating, so these methods aren't very reliable. But they're better than buying just looking at prices and charts... if the calculations are made in the most conservative way.

[@shubhampawar2946]

Hi. I have been watching your videos for a while now and hands down they are really good and helpful for beginners like me. I checked the software you recommended and on the website, it says, "Built for Australian investors". I live in Ireland..so my question is, can I use this software?

[@LaurenLinhNguyen]

Yes you can definitely can. they track more than 100 brokers around the world. and if you send them an email asking if they can add your broker to the list, they will

[@evilcastier]

Could you show how to find the capex and maintenance capex on a 10k like AMD? Its been difficult to calculate for me since it doesnt match what the capex in some websites have. :(

[@MrCapsMan]

So I've commented before on your previous videos and never seem to get a response. I'll try one last time here: It seems you happened to pick a stock (in this case Thor Industries) that nearly perfectly predicts profit per share based on free cash flow valuations. However, I ran the same calculations for $COF and $GOOGL. In these cases, FCF grossly overestimates $COF 10-year performance while underestimates $GOOGL. If results are so inconsistent, how can we be confident in the valuation method used? It also seems stock price is more in line with EPS over 10 years than FCF.

[@dmk8791]

Is Cash Flow for Owners and Free Cash Flow the same thing, just different terminology? Cheers

[@aaronlewis9577]

Hey Hamish I was recently browsing for stocks in the finance sector and I found a French company called CNP assurances, I ran the financial data through the spreadsheet and it came out to a 95% rate of return🤑😱, I was shocked as I’ve never seen anything like that in my life as all the other companies give realistic returns, is this normal? It’s Financial situation isn’t the best but assets are still greater than liabilities or is this some sort of debt trap. Love the videos thank you so much👍

[@jaroncorleone]

Hi Hamish I would like to know why is that you divide Equity by 30 to compare it with the price of Thor Industries? Can you share this sheet with us? And by the way Very nice video as usual

[@HamishHodder]

Hey Jarod. This was just so that the two lines would be scaled for comparability. I actually divided equity by 30 million (I misspoke). If I didn't scale the equity down then the lines would be too far from each other to compare because the share price would have been in the $50-100 range and the equity figure would have been in the billions

[@sokaipreta]

when i use sharesight i am getting a total return of $46.48 for Thor industries. i'm guessing that the discrepency has to do with currency conversion (i'm in america).

[@jonathangonzales3736]

Why do you use cash flow for owners instead unlevered free cash flow?

[@manfredadams3252]

Phil Town's Margin of Safety is a DCF calculation. Only he then cuts the result in half.