Saturday 2 May 2009

Short Form for Value Appraisal


Making the Value Judgement in Practice

It is important to have a practical, simplified model for picking out value investments.

The goal is to boil the selection process down to something that could be handled in a half an hour or less per company.

One wouldn't commit $10 million in capital to a company based on this analysis, but it provides grounds for making small investments or pursuing further research.

At the end of the drill, you should, as Peter Lynch suggests, be able to tell the story of a stock to family, friends and favourite pets.

And most of all, to be able to understand, yourself, why you like or don't like a business as an investment.

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SHORT FORM FOR VALUE APPRAISAL

COMPANY:

DATE:

SHARE PRICE:

VALUE SITUATIONS:


GARP
ASSET PLAY (P/B)
- UNDERVALUED,
- S.O.P. (SUM OF PARTS)
- SMOKE/MIRROR/MIRAGE
GROWTH KICKERS
TURNAROUND
CYCLICAL

------------------------------------------------------------------------
----------------------------------------GRADE -----TREND
---------------------------------------- "A" - "F" ---- +,0,-
------------------------------------------------------------COMMENTS
------------------------------------------------------------------------

FINANCIALS
OVERALL

ROE steady or rising, and/or > 20%
Gross margin increasing
Operating margins increasing
Net profit margins increasing
Asset and unit productivity improving
Cash generator: net producer of cash or capital
Cash position
Debt profile
Return to shareholders (dividend, net share repurchase)
Consistent performance
Strength compared to competition and industry
Other:

---------------------------------------------------
---------------------------------------------------

INTANGIBLES
OVERALL

Market power - brand, share, customer loyalty
Long term growth vectors
Strong, effective management
Pursuit of shareholder interests
Favorable "SWOT" analysis (attach)
Other:

-------------------------------------------------
-------------------------------------------------

VALUATION
OVERALL

Price vs Intrinsic value
P/E and earnings yield
PEG <2
P/S <3
P/B <5
Other:


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OVERALL ASSESSMENT




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