Warren Buffett Intrinsic Value Calculation – Rule 4
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Lesson summary:
The video discusses Warren Buffett’s fourth rule for determining the intrinsic value of a stock. The two lesson objectives are how to calculate the intrinsic value of a stock and how to use Buffett’s intrinsic value calculator. The video compares Sirius XM radio and Disney to understand the rules and principles, and shows how to use the intrinsic value calculator. Buffett’s definition of intrinsic value is an estimate rather than a precise figure, and it is the discounted value of the cash that can be taken out of a business during its remaining life. The video teaches how to use the calculator, why Buffett only looks ten years into the future, and how to calculate the intrinsic value of a business.
In summary, the video covers the following points:
- The video is a part of a course on Warren Buffett’s principles for determining the intrinsic value of a stock.
- The focus of this lesson is on the fourth rule, which involves calculating the intrinsic value of a stock to determine if it is undervalued.
- The previous three rules of Warren Buffett involve assessing whether a company is managed by vigilant leaders, has long-term prospects, and is stable with predictable financial numbers.
- Intrinsic value is the discounted value of cash that can be taken out of a business during its remaining life.
- The intrinsic value calculator considers the future cash flows of the company for ten years and compares the value to that of a zero-risk investment such as a ten-year federal note.
- People can view the same set of facts differently and may come up with different intrinsic value figures.