The great Warren Buffet is a master investor that we all are learning from. Including the Payback Time genius author Phil Town. Have a look at the company: Berkshire Hathaway (BRKB)
Here’s Phil Town actually would recommend a stock like this BRKB stock: Phil sees the Historical Growth Rate of 20% a year, Analysts estimated Growth Rate of 10-11%. Phil Town also likes the a historical PE of 20, Sticker Price is pretty good today with a MOS If everything goes as analysts expect and you buy it a below its value price then your ROI will be about 20% a year. The analysts can be wrong and still have a nice Margin of Safety to earn a solid 15% or more. This is what Payback Time stockpiling can do for you and demands. Would you buy it at $68,000 price per share price it was back a few years ago. Here is today's current BRKB stock price. Of course after listening to President Obama's State of the Union speech you'll need to realize that we are likely to be in a turbulent market for the next 10 years as we continue to run up the national debt and print more money.
Monday, January 25, 2010
Another Look in History
Phil Town was talking the other day about a old company that has radically changed: Kinder Morgan (KMI)
Phil noticed that back then CNN financial likes the KMI stock: Canadian pipelines add juice to consistent earnings base.
Here’s why Phil Town kinda sort of might like it some. If you look at the Historical Growth Rate of 23% a year, Mr. Towns notes that the Analysts estimated Growth Rate of 7-12%. With a historical PE of 20, The stickerSticker Price is $100 with a MOS Price of $50. It’s selling for $92. If I want to invest in natural gas, which I do, and if things go medium well, my ROI might be about 16% a year. This is more like investing. Not everything has to go right and I can still do okay. If KMI manages to hit its plus 20% growth, this one is going to be a good investment, so it's worth looking into deeper. The big question is: Will ethanol kill growth in the gas and oil industry? Doesn't really look like that ever happened. So while it could be awesome for the right Payback Time investor back years ago but now it totally missed the mark.
Phil noticed that back then CNN financial likes the KMI stock: Canadian pipelines add juice to consistent earnings base.
Here’s why Phil Town kinda sort of might like it some. If you look at the Historical Growth Rate of 23% a year, Mr. Towns notes that the Analysts estimated Growth Rate of 7-12%. With a historical PE of 20, The stickerSticker Price is $100 with a MOS Price of $50. It’s selling for $92. If I want to invest in natural gas, which I do, and if things go medium well, my ROI might be about 16% a year. This is more like investing. Not everything has to go right and I can still do okay. If KMI manages to hit its plus 20% growth, this one is going to be a good investment, so it's worth looking into deeper. The big question is: Will ethanol kill growth in the gas and oil industry? Doesn't really look like that ever happened. So while it could be awesome for the right Payback Time investor back years ago but now it totally missed the mark.
Historical Growth Rates analysis
Phil Town is an expert investing guru using the Payback Time method of investing and value investing. Phil Town does not agree with the CNN financial. Cnn's thinks that the biggest thrift yields more than a Treasury bond
Here’s why Phil Town disagrees and don’t like it: Phil Town looks and analyzes the Historical Growth Rate of 13% a year, Many Analysts estimated Growth Rate of 10%. With a historical PE of 11, of course you'll notice the sticker Price is $26 with a MOS Price of $13. It’s selling for $32 as of today. CNN Financial guys likes the 4% dividend. Who wouldn’t. But as that’s not the whole story on this issue. If the stock price goes down to its real value as a business, you lose half your money. That makes the 4% dividend look kind of anemic. So let's combine the two and see what we get. If we buy WM at $42 for the dividend and if the dividend continues to grow at 12% a year and and then we sell it in ten years, including the reinvesting the dividend at 12% a year, we still only end up with a 14% compounded return. That is just a tad below our minimum and assumes everything works they way the analysts expect. So, no Margin of Safety here even with a fat dividend check. Interesting how the price we pay makes such a huge difference in our return. So more of this little snapshot investing recommendations coming in the next few days.
Here’s why Phil Town disagrees and don’t like it: Phil Town looks and analyzes the Historical Growth Rate of 13% a year, Many Analysts estimated Growth Rate of 10%. With a historical PE of 11, of course you'll notice the sticker Price is $26 with a MOS Price of $13. It’s selling for $32 as of today. CNN Financial guys likes the 4% dividend. Who wouldn’t. But as that’s not the whole story on this issue. If the stock price goes down to its real value as a business, you lose half your money. That makes the 4% dividend look kind of anemic. So let's combine the two and see what we get. If we buy WM at $42 for the dividend and if the dividend continues to grow at 12% a year and and then we sell it in ten years, including the reinvesting the dividend at 12% a year, we still only end up with a 14% compounded return. That is just a tad below our minimum and assumes everything works they way the analysts expect. So, no Margin of Safety here even with a fat dividend check. Interesting how the price we pay makes such a huge difference in our return. So more of this little snapshot investing recommendations coming in the next few days.
Friday, January 22, 2010
Payback Time- Rule of 72
When doing you research on companies of value as an investor here is a really important rule. Phil Town, the author of Payback Time, uses the Rule of 72 pretty much all the time. Divide 1 into 72 and you get 72. It isn’t perfect but it’s quick and dirty and does not require a calculator. Lets look book value per share (BVPS) in 1999 (the oldest number) is .40. In 2004 it was 8.41.
Now if you begin doubling .40. double the 1st time and get .80. Double the 2nd time to 1.60. Double three times to 3.20. Double 4 times to 6.40 and then part of a double to get to 8.41. Phil Town will examine the number of years. For example the year 1999-2000 is one year, you get the idea right? Phil Town found 5 years with 4 doubles. That’s a double almost every year. Are you tracking?
You gotta love the rule of 72 for quick and dirty work. You get to where you can just glance at the numbers and then quickly do the doubles on the oldest number and see if the equity growth rate is high enough. The rule of 72 will save you loads of time in doing your RULE #1 research for businesses on sale. Now go load up the truck.
Now if you begin doubling .40. double the 1st time and get .80. Double the 2nd time to 1.60. Double three times to 3.20. Double 4 times to 6.40 and then part of a double to get to 8.41. Phil Town will examine the number of years. For example the year 1999-2000 is one year, you get the idea right? Phil Town found 5 years with 4 doubles. That’s a double almost every year. Are you tracking?
You gotta love the rule of 72 for quick and dirty work. You get to where you can just glance at the numbers and then quickly do the doubles on the oldest number and see if the equity growth rate is high enough. The rule of 72 will save you loads of time in doing your RULE #1 research for businesses on sale. Now go load up the truck.
What is the Ten Day Moving Average on Wall Street
Did you know that Phil Town describes what the 10 Day Moving Average (MA) is, in his RULE #1 book? There Phil Town shows you how to get you in quicker, so that you get the maximum amount of upsurge in the investment price.
If you are not so sure about all four M’s, then you could be in for a lot of volitility as we’ve seen in some recent examples in the stock market.
Doesn’t mean that these folks didn’t pick good businesses available at attractive prices… but it might mean that something is going on in the industry or economy relative to that industry, or maybe some problem is cropping up in that company that is still undercover, and the price just keeps drifting down.
Remember everyone, that the moving average trend really is your friend and fighting it just doesn’t work out well. If the Big Guys are consistently moving out and the trend is down, then it’s time to take shelter in Cash and wait patiently for the bottom and a new uptrend to get established. During this time, find another great business at an attractive price… or just hang out and do nothing. Doing nothing turns out to be the right answer more often than not since you are still showing no loses.
So here is a way to think about this: If you are not dead sure about the value of this business based on experience as a Payback Time investor and this thing is trending down, don’t touch it.
If you are not so sure about all four M’s, then you could be in for a lot of volitility as we’ve seen in some recent examples in the stock market.
Doesn’t mean that these folks didn’t pick good businesses available at attractive prices… but it might mean that something is going on in the industry or economy relative to that industry, or maybe some problem is cropping up in that company that is still undercover, and the price just keeps drifting down.
Remember everyone, that the moving average trend really is your friend and fighting it just doesn’t work out well. If the Big Guys are consistently moving out and the trend is down, then it’s time to take shelter in Cash and wait patiently for the bottom and a new uptrend to get established. During this time, find another great business at an attractive price… or just hang out and do nothing. Doing nothing turns out to be the right answer more often than not since you are still showing no loses.
So here is a way to think about this: If you are not dead sure about the value of this business based on experience as a Payback Time investor and this thing is trending down, don’t touch it.
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