Buffet’s Tenets:
Buffet’s Market Value Tenets:
- What is the value of the business? The cash flows of a business discounted back to today’s present value determines the intrinsic value. Discounted by the long-term treasury rate plus 2% to 4% depending on your risk preference (Buffett uses 15%).
- Can the business be purchased at a significant discount to its value? Look at the stock price. Can you purchase the stock at a significant discount to the stock price. The greater the difference, the greater the allowance for a margin of error. (At least 50%).
It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price. -- Warren Buffett