28. When to sell stock like Warren Buffett

Access free tools and notes to these lessons at: www.BuffettsBoo...
Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location:
www.amazon.com/...
www.amazon.com/...
In this lesson, we learned the importance of always understanding the consequences of our actions. Buying and selling stock can have an enormous impact on our success as an investor. The most important thing to learn from this lesson is the emotional decisions when selling stock can often lead to very poor results.
We learned that there are two major rules for knowing when to sell stock:
1. We sell stock when we can trade the capital into an investment that will produce a larger return after accounting for the capital gains tax paid (state and federal). In addition, you'll want to ensure the risk assumed is comparable for the return received.
2. We sell stock when the business changes its fundamentals. This could mean the way they manage debt. The future outlook for earnings is decreasing...etc
Although the process of accounting for a change in assets is laborious, its purpose often results in enormous financial decisions. Mastering the techniques taught in this video will undoubtedly lead to your success as an intelligent investor.

[@Riggsnic_co]

The thing to me is, if you invest and have other income outside of dividends then you will be able to live off dividends without selling. Which means you can pass that on to your kids which will give them a leg up in life. $52k dividends received in 2022.

[@TheJackCain-84]

I agree! That's why it is advisable that you have to invest while you still have a regular job or earning a regular income, and do it constantly. You still need to have something that will keep you going even if you're investing. Good financial planning and money allocation is the key.

[@martingiavarini]

I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured some money in value stocks and digital assets,i accrued over $80K in dividends last year

[@Will.iam6693]

I’ve been down a ton, I’m only holding on so I can recoup, I really need help, who is this investment-adviser that guides you?

[@martingiavarini]

'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.

[@Will.iam6693]

She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.

[@iWerli]

Glad i found this channel. Finally someone who isnt screaming at the camera day trading on robinhood lmao.

[@JayRileyArgue]

haha

[@amaraturner5764]

Lmao

[@marcelmarkus6969]

sorry to be off topic but does someone know a trick to log back into an instagram account?? I was stupid forgot the account password. I love any tricks you can offer me!

[@kamishbhamani5364]

Can you please make a video on calculating intrinsic value of a company manually like without using your website calculator. I really want to know how it’s done without the calculator.

[@MyDreamside]

You should be a teacher in economics, i have graduated from economics University but no one could explain this so good and to keep the studends interest, you do an amazing job! These lessons are precious.

[@RubenGomezRealestate]

Same here, no one was even close to explain this clear when I when I got my econ degree

[@harshildave6482]

Hello sir. I am your fan of your youtube channel from india. Really great comparision. Keep going on. Thank you so much.

[@pablorojas4577]

Could you please write down the intrinsic value formula?

[@julianjohnson5294]

***** What is the actually math formula for the intrinsic calculator... Just in case I wanted to do it by hand so I can visualize the process.

[@zrt95]

my guess is it is somewhere along the lines of the basic compound interest formula, A = BV*(1 + r)^t, where BV is the book value, t is the number of years and r is the rate of return. For his first example, I'm guessing that r = 7 - 3 = 4% (or 0.04 in the formula). When I use this formula I get $71.05 which obviously is a bit off from his result of $70.25, but I've tried it with all his other examples and it gets a similar answer every time. As for when the dividends are considered, I'm not sure how he includes it, but I would just take the average yield over the past 5 years (which can be found on Morningstar under Valuation) and also add that to the rate of return. IMO this calculator is pretty bogus. If you watched his last video he said that $44 was way too expensive for Disney. Welp, 4 years later, it not once went down to the $40 he thought it was worth and it is now worth about $100 and that's after a 20% pullback in the stock too. There's a couple reasons why he got it wrong: First, he assumes that the market trades the stock at the EXACT same price as the book value (ie. P/BV = 1). This is almost never true, especially for consistent and fundamentally sound companies like Disney. In fact, the 5-year average P/BV is 2.8, a far cry from 1. Secondly, he is forgetting Buffet's most important rule, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Especially considering the amount of possible error in this calculator, there was not significant reason to NOT buy Disney, unless it was trading at some ridiculous P/E and P/BV. IMO, if you find a company that meets all the criteria that Preston (and more importantly, Buffet) has outlined as a strong, stable company, then it definitely is prudent to be aware of the P/E and P/BV, but also realize that most great companies rarely trade at Buffet-value standards, perhaps only once every 5-10 years. Also, it's helpful to look at a company's 5-year average of P/E and P/BV on Morningstar because different industries and different types of companies (ie. growth vs income companies) generally trade at different values. I can promise that you won't be disappointed in holding Disney shares 20 years from now, no matter what price you bought them for. If you're really concerned about price, consider cost-averaging, where you buy shares in multiple purchases over time, but just don't forget about commission fees. In summary, Preston has done a really good job at explaining company fundamentals, but don't get too caught up in the intrinsic value calculators. I can guarantee Buffet doesn't use this exact same method to value companies.

[@mattg3884]

@@zrt95 know I'm a bit late but I do like this calculator. Due to it assuming stocks trade near book value(which they dont) it means this calculator is very conservative. It did not consider Disney to be a buy at $40 because it wasn't "undervalued". If this calculator says a stock is under valued. It is as long as the other rules are met.

[@balakrishnachintada1]

Thanks Preston for your highly educated lesson. I am from India and just curious to know if I can use the intrinsic value calculator for any currency or only for USD? I am sorry for the silly question.

[@CaptainMarmoo]

anyone know how the intrinsic value calculator is calculated?

[@hotsauce122690]

If the future value of XXX in ten years is 77K, that means it would have to be trading at a market price of $77, correct? But we calculated the intrinsic value (in 2012) to be $50. Why would you calculate that XXX's value to continue to grow (to $77) when you believe that it's intrinsic value ($50) is significantly lower? I must be missing something...

[@tinnguyen2219]

Thank you so much for sharing such useful data! Greatly appreciated

[@factsandmyths3301]

Why not use the CAGR formula?

[@carrieyoung3428]

Hi. Im from the UK and we have GILTs instead of fed notes. Do I punch in the calculator the gilt yield or coupon. Little confused. Thank you :-)

[@itsAag99]

Watching u e video since lesson 1 Excellent Do you have all these slides downloadable for reference ?

[@sanjibmuscat]

i see in your site BuffettsBooks, there is no summary for course 2. Because when i click the course 2 for videos at your site -it is showing course 3 videos. So i think there is no summary of lessons for course 2 .. Can you please check and reply. Thank you.

[@kanyefishsticks]

hi Preston, how do we determine the expected growth?

[@sergiveramartinez2685]

Does anyone have the actual capital gains tax of 2019? I can't find it. Thank you in advance

[@shanedown3115]

Does anyone know a good, free website for finding historical data such as book value per share? They all seem to be behind paywalls.

[@drorialinski9617]

www.macrotrends.net/stocks/research

[@venkat8558]

I calculated the same example 70000*(1+.1)^10 Gives me 181,561.9722 not his values. Can someone correct me!? Or is his math wrong?

[@soandrei8785]

(1+0.1)=1.01 raised to 10 = 1.10 x 70000= 77000

[@JA-yi8bs]

2020 and this channel is still a thing of beauty - thank you, Preston!

[@gruminatorII]

Dont know why you would need that calculator, i m 100% new to investing, i just know about exponentials as i am physicist and i can do those calculations myself faster than that calculater, that does not even make you understand what you do

[@thelifeofpaladin]

Could you please tell me the formula he uses that the calculator does

[@JMoney-ne3to]

I believe your present value is incorrect on the last calculation (around 29:30). I believe that it should be 66,000 instead of 70,000. We get the idea though, so thank you.

[@genevrier9851]

J Money that's right, I didn't understand at the beginning why it was $70,000

[@Fath-gx9mk]

same here

[@Mauro7789z]

Hello preston could you tell me why Berkshire Hathaway is trading at 145 dollars but has 221890 on total equity and 1.65 shares outstanding that would be crazy right? im i doing something wrong? i get the numbers from www.investing.com/

[@mr.ubiquitous2927]

What is the formula behind the intrinsic value calculator? Please show the math.

[@johntenorio9086]

can anybody tell me what is the formula of Intrinsic Value, I don't like the idea of just inserting numbers.

[@VinhNguyen-kq8jg]

It is actually pretty simple. You estimate the book value in the next 10 year, total dividend you get in 10 years. Sum these two number, then you will get the value of cash taken out of business, lets call this value V. Now assume you buy FED note with the interest rate R. The intrinsic value = V/((1 + R/100)^10)

[@辽宁篮球]

@@VinhNguyen-kq8jg yeah you are right, but I think the exact formula is intrinsic value = V/ ((R/100)^10), also I am confused with how the formula calculates the total dividends for 10 years, like, if I input dividend for one year is 1$, seems like they didn't sum it up to 10 years, instead they use the dividend for one year as the 10 year's total dividends. for example, the formula seems to (BV increased in next years + one-year dividend) as V, but not (BV increased in next years + 10-year dividend). appreciate any comments to correct me.

[@khatranik05]

@@辽宁篮球 can you plz tell me how this formula work? Like if your book value is 48, u will get interest as 8% for next 10 year and fed give u 3% so we should calculate just 5% interest rate for next 10 year which is 24 so intrinsic value should be book value (48) + extra u get (24) = 72 Am I right or not??

[@辽宁篮球]

@@khatranik05 honestly I don't think I fully understand the formula. but I think the Vinh's idea above is right, but based on my experiment, the calculator on the website didn't calculate like the way I expected. so I am also confused as well now.

[@unitedstateser]

The guy at the "Learn to Invest" youtube channel has a video where he explains the formula. It's complicated.

[@dextertom1177]

Did you ignore the margin of safety to keep it simple?

[@ronhoward2047]

Crypto investing is tough quite alright but not as difficult as it may seem if you follow the basic rules and don't love or get emotional with your coins. It is volatile and scary at times as things can fly up and down at extreme rates. If you are not careful, then you risk massive losses. To ensure continuous profitability, make sure you learn, be careful and do not listen to stupid things most Crypto traders say on youtube and other forums as they are lots of speculators in the market who tell you xrp is going to moon or BTC is at its dip and a reversal is sure and you even lose more money holding on to coins because they said so. The truth from my personal experience is that trading daily is far safer and more profitable than HODling with so much uncertainty in the market. I have lost over 8 BTC value HODling for one year and have gained over 13 BTC in less than two months, something I am sure is a daydream for most hodlers. You have to be careful though and be exceptionally good in your T.As, reading the news and understanding the trend correctly. I would also like to stress is that if you aren't 100% sound in these, you should make contact with someone with good experience and trade history to help you through. Someone I would highly recommend is James Long **(jameslong241 @ Gmail. com). His analysis is sound, and his trade signals and strategies are some of the best out there to follow. He helped me recover my losses and make gains I find hard to believe.

[@oldergod]

I think there is a hole in the logic. In step 1, we calculate the return on current as if we were buying it at $70 but why? Shouldn't the yield be compared to the purchase price?

[@ericfernandez4972]

Hey Preston, could you please explain mathematically how your calculator uses the 10 year federal note to calculate the intrinsic value? It just helps me to understand what is going on. While I do really appreciate the "just plug it in and... ta da!" I am just more of a "why did that happen person" maybe I missed it in one of your videos, if so could you direct me to it? Thank you so much for these videos, I actually feel confident when picking the companies I invest in!

[@BenHayak4]

@[Preston Pysh] I believe you have mistakenly used $70,000 (before capital gains tax) as PV instead of $66,000 in your FV formula at: kzbin.info/www/bejne/Z5uronaBn5WDi68 even though the $112,732 is indeed the correct FV of $66,000 in 10 years. But you might want to fix this slight presentation mistake. Thanks for the video!

[@yangroger1216]

If you are confusing with the calculator, try this. Assume that we will hold a company for n years Use this to calculate annual return of a company: current market price * (1+annual return)^n = current book value * (1+estimated book value growth rate)^n + dividend * n Use this to to to calculate intrinsic value of a company and then compare it with current market price intrinsic value * (1+ n-year time deposit interest rate)^n = current book value * (1+estimated book value growth rate)^n + dividend * n

[@selcuksaglam4849]

Hi Preston! In your last calculation (29:21) present value seems 70,000. Shouldn't it be 66000 ? I couldn't be sure if it is just a mistake or did i miss something ? Also you are doing well! better than many professors to be honest.Thanks for your effort!

[@apurvabhavsar4011]

For calculation of Intrinsic Value, How Book Value per Share Calculated means suppose One Company (ABC) during 10 year period, if issued Bonus Share or Split their Share or Employee Stock Option, How we have to calculate BOOK Value Growth: Should i consider revised book value i.e ( 10 Year Old Book Value/ 10 Year Old Share Issued + Bonus Shares Or Split Shares or ESOP)

[@SzeHong93]

Why do we use the 10year notes as the discount rate, rather than the discount rate which takes into account the risk premium of holding that stock? (CAPM)

[@Tahj2828]

Is it possible to use WACC formula as a default required rate of return instead of using 10 year federal note? I'm slightly confused about the whole idea of using the 10 year fed note to calculate the return for each company. Can someone tell me where i can find the formula for the intrinsic value? I'm not a huge fan in using a calculator if i don't understand the formula.

[@dutchy222]

Incredibly clear explanation. Thank you very much!!

[@p27491]

thank you , although i was searching for company xxx it did not end well 😂🤣😂🤣😅

[@daronross6969]

can anybody please tell me if a ''10 year federal note'' is the same as a ''10 Year Treasury Rate''? thank you in advance.

[@gelamegeneishvili130]

2024 and still an amazing course, thank you Preston!

[@weibinren92]

I don't get why the company TTT will get a 5.5% growth per year

[@mth6311]

Can somebody explain why its PV * (1+I) Why is it '1' + the interest rate, if that makes sense. Where does he get the 1 from? Is that used everytime when you use this equation or did i miss something in the video. Thanks

[@harshildave6482]

1 is for getting compouning effect on present value. If we are calculating intrest on (normal)saving account dont required to add (1+)

[@maccap4598]

If your referring to FV = PV * (1+i)^(n). This is just the simple compounding formula. If I have $110 and I expect an 8% return over the next two years: My first year my money would be 110 * (1.08) ^(1) = $118.80. The next year would be 110 * (1.08)^(2) = $128.30. The way I got the 1.08 is by adding 1 + .08 ( or 8%). The 1 just accounts for the principal while the .08 accounts for the growth of the money.

[@bozzicone]

should we do this calculation every year or just once?

[@marilynspikes]

OUTSTANDING. Superb, I am addicted to your videos. Thanks for helping to navigate through your intrinsic value calculator on your website.

[@uzfxacademy]

Most Professional and Highly Educated Lessons, I really like and Appreciated Hard Work. I also downloaded all Lessons. i am very beginners in this filed and now i am happy to find these Lessons. if any body understand completely these lessons then no need to watch another videos on KZbin about stock. +(Mr. Preston Pysh), Thank you so much.

[@karinabalinya7610]

***** And if im not in USA but want to invest in to usa companys, what country will take taxes from me? mine or the USA? should i look for tax rates im my country too and calculate that?

[@MM-kq8gc]

Great video; only bit I don't understand is why (1*01)n is multiplied by the current the current value to give the future value.... 0.01 represents the treasury note rate; so I don't understand why this would multiplied to give FV?

[@TTTT-rw7xt]

Hey ppl, I do this calculation at 29:10, which is, 66k x (1 + 0.55) on the tenth... and I get this number: 5282760.4434309439453125. wtf happened? where did I screw up? :? can someone pls help ? :/

[@jorgeezy]

+TTTT 0.55 is 55% you want 0.055 which is 5.5%

[@TTTT-rw7xt]

+OfficialJorgeezy Thanks M8 highly appreciated!

[@san8vicente]

Great video on 28:32 you made a typo and used PV of $ 70k instead of $66K. Very informative thank you, I learned a lot.

[@fast95C]

What is the calculation in intrinsic value?

[@gabmol27]

Hi!! I'm rewatching some of your videos! Great job! I have a question here. You recommend as a value investor purchase companies that pay some dividend, however the examples here are of companies that do not do that. The point is that it's very hard to find companies that fulfill all the requirements of a value investor, but if I forguet the dividend, I can find at least a dozen of interesting companies (low debt, stability, etc.) Should I proceed with those?

[@shbx7059]

Hi, will this calculator for intrinsic value work on Uk stocks? I’m asking as the bond rate for US is used

[@robertocanales1201]

Thank you very much! 😑🙏🏼

[@pioneercolonel]

I think there is a logical error in your analysis. In the first scenario you should not assume your total capital to be 70000. That's the market price for someone who wants to buy the stock. Since you already own, your capital is not 70k but 66k since you will be taxed no matter what. Your first scenario makes sense if an outsider wants to buy the stock. You are already in the pit, you don't have the same footing as someone with 0 current investment. I think you must readjust the interest rate until it hits 66$ not 70$.

[@angjelosmane9025]

So, besides the Federal taxes we have to pay State taxes as well? Isn't that a lot of money taken out of your wallet?

[@amz3792]

your considering only equity value basis? but what about market price if XXX will be high ? please clarify!!!!

[@sonnyume3959]

Hey Preston, great videos. Just a quick query, could the intrinsic value calculator be used if you were investing in the United Kingdom? Could the calculator be adjusted for the Sterling pound and Glits (our treasury notes)? Many thanks

[@stanko4333]

I think that in the last calculation Preston we are using 66000 as the principle because we lost 4k from taxes ? Right ?

[@mominjb22]

HI preston, I love your videos but I was wondering if you have actually told us the formula to find the intrinsic value?

[@flam3ng0]

Preston, you are a great teacher. Congratulations and thank you for the good work. One question, where could I go to learn about the maths behind this calculator? Thanks.

[@jozefsubczak8872]

Bankiero Ok Teyk Yes Ok

[@Slywolf1992]

Question: Do you pay capital gains tax if your stock loses money and you are forced to sell at a loss? Would it be capital loss tax? lol. Good video by the way.

[@nektariosnikopoulos4055]

is the intrinsic value calculator accurate? Really is it that simple? How can we know if it is accurate? Actually i should rephrase to-is this a good method to predict intrinsic value?

[@khasimbaig]

Hi Preston Pysh, Just completed this lesson 28. Excellent for the beginners. See u in New York on April 6th.

[@spatel9168]

Hi Preston, i love you videos but quesion is i would love to hold it for five years or more but this days Market seems work on psychology and how do you figure when to get out of the market?

[@kenanlambo]

At 29:00, if the present value is what you can currently invest is $66.000, then why are you using $70.000 for the calculation? I mean, you don't have $70.000 to invest in these shares, you can only invest $66.000. To my logic it would be 66.000 x (1+.055)^10

[@Gurjars007]

Thanks you sir ❤️

[@brunonudelman5781]

Very Good Preston! thanks for sharing all this with us! you are amazing!

[@levi4660]

I see you didnt use the P/E ratio in analysing the stock???

[@daniels4149]

Wheare i can see book value grouth

[@moatazsheikha2876]

That was really insightful and helpful, much appreciated

[@AakashSawant001]

your video have taught me so many things ...my knowledge has grown with each of you video ... thank you soo much ... god bless you!

[@hl3641]

Tax kills lol

[@kenanlambo]

Can't I calculate the intrinsic value of the share over 1 year time? So using the 1 year federal note into this calculation?.

[@StephCoCo]

Thank you.

[@25Soupy]

How does an index investor decide to sell and what would they buy?

[@tonyjohn1395]

How do you calculate the intrinsic value of an etf or tracker , or is it impossible ❓

[@robertboles1559]

Firstly, I want to congratulate you for making a set of videos that are truly brilliant. I am wanting to start investing, value investing to be precise, so buying stocks and keeping them for several years and benefitting from the dividends and increase in share price. For someone new to stocks but wanting to get into it, there is a lot of information out there that would take an age to learn. Would you agree that if you listened, understood and applied the knowledge taught in your videos 1-35 plus the buying shares online for beginners video you have done, you would have the right fundamentals to start trading? Thanks, rob

[@imlkr_]

Glad i found someone watching now. I wouldn't say they are enough but surely they are for building your fundamentals strong. U can take some legit online courses on value investing and especially in the current market conditions. Way to go!!

[@Let-It-Breathe]

hey where can i get the software where you calculate the stock on the right of the screen?

[@ProHabla]

´LOve the videos. you do great and you're getting alot of new views. I started watching at 14,000 views. What happens if companyy TTT pulls a stunt like company xxx?? So hyou have to just be checking all the time??

[@shaunhaldane4599]

Hi, thanks for the videos they are incredibly helpful and I have ordered both of your books for further understanding. Could you tell me though, I noticed that to calculate the intrinsic value of a company that you compare it to the cost of a federal bond in the USA. If the company is international, do you compare it to the bond given by the country of origin? I'm new to investing and living in Scotland but I want to apply your teachings to the British/European market but I'm not exactly sure how to compare the value of companies here to federal bonds. Would it be possible for you to make a practical exercise vid about international markets?

[@texasaggie85]

Shaun Haldane I think the point is to compare it to a ‘zero risk’ investment that you are able to purchase... if you consider bonds issued by those governments to be zero risk then it’s a valid assumption.

[@sandeepjain184]

Hey Preston, thanks for all the wonderful videos. I love it. Do you always calculate the intrinsic value of a company for last 10 years or less ?

[@jackyd4375]

I guess its a good thing that Canada has TFSA, so capital gains won't be taxed, unless we're buying US stocks.

[@thebigmacd]

You can buy and sell US stocks in a TFSA, no capital gains tax. You will, however have the 30% foreign withholding tax taken off of dividends by the US government. There is a whole list of foreign exchanges (NYSE, NASDAQ, Frankfurt, London, etc) you can use capital-gains-tax-free. Better to use an RRSP for US holdings that pay dividends...RRSPs are exempt from US foreign withholding tax on dividends.

[@sletr0]

Hi Preston, sorry but you have a mistake in last FV formula, PV is 66k and you put 70k, check it.

[@wadehsu4300]

What is the formula for intrinsic value? And i do not understand why you have to punch in the 10 yr treasury rate to calculate intrinsic value

[@dramese]

One the best channel on KZbin, thank you so, this is gold. Your ability to break things down in it fundamental level is compare to none 👌🏿👌🏿

[@sletr0]

Hope it helps to others understand your great lessons. Thanks for your videos, I wathed them all, even after Benjamin Graham books.

[@cynthiacarolina1656]

really love all of your videos!! very easy to understand, and convey the knowledge in compact and solid message in each video

[@akshitbindal9351]

Is 10 year federal note called 10 year government bond in India ? Please help

[@akshitbindal9351]

Dhiraj Pathak thanks :)

[@sletr0]

Look at 29:02, FV=70k*.... but there should be 66k, correct me if I wrong.

[@LyonsKevin]

Where do you find the forecast for future earnings? In any case I enjoy the uploads.

[@momenttom4969]

One on the best video's on investing

[@abenezerk4984]

What do you think about the downfall of apple stock?

[@jijov.j1545]

Hi 100 th comment is done by me

[@baliga2012]

Excellent tutorial with very good communication and visual examples.

[@zoefofo7769]

Important but I fell asleep

[@Piggy991]

This course 3 is gold

[@lucaria1655]

Book name plz ??

[@ADR1094]

This was very helpful! Thank you

[@MacSmithVideo]

very cool

[@TheBlkbillionaire]

Great Videos

[@christhuang911]

Great.