Investing Forum - Warren Buffett and Value Investing
Intrinsic Value Questions
Can the Intrinsic Value Calculator be used for any country and currency?
Intrinsic Value Questions
Can the Intrinsic Value Calculator, in the buffettbooks.com, be used for any country and currency since only numbers are to be entered?
i have a similar sort of question..i am from india...in place of 10year federal note,what are we supposed to use in intrinsic value calculator...
The yield on the India 91day treasury bill can be used as the risk free rate.
I was also wondering about what I
would use instead of the 10 year federal note for Canadian stocks and which website would I go to?
These are a few sources. I am not really so sure about new issue bonds. I guess you could ask at the bank. I am with TD webbroker and they list most major bank and credit union GIC rates updated daly. Mostly I can only see secondary market debt and the bond yield's look yuck. I guess the people who are into bonds have a lot of money and just snatch them up.
I may consider buying some debt if the rates go up and the prices come down a bit. At least investing in equity will help protect your investment from inflation over the long run.
A money market with td .75% or savings with royal will earn you about .5% paid monthly, GIC's you can get around 1.4% annual or more depending on the length.
Longer term rates don't look much better.
Most Canadian banks yield at least 3.5 percent dividend. There is some risk with record level debt, housing market bubble and lot's of oil companies loans on the books. All of this has combined to make Canadian banks earnings grow nicely. Things like the Canadian mortgage housing insurance help protect the bank from bubble's it also I feel hinders any correction to overpriced housing. If you are in it for the long haul those bank dividends are a pretty liberal rate to use even with our relatively flat economy. If you are more conservative then use the treasury bill yields of around .5% or somewhere in between.
Ghazel, wouldnt .5 be more liberal then the 3.5%? Considering the discount rate of 3.5 will ground your intrinsic price more then .5 would?
you are right, I was thinking the same thing after I wrote it but I figured he would know what I meant. It could be true in a very literal sense. I guess it could be a big deal to someone who is not so sure what they are doing. I should be more careful with my words.
No big deal.. I was just checking to see if that's what you meant.
I have a confusion as we make use of 10 year federal note for US based stocks, now what should we use because 91 day treasury yield for india is for 91 days I believe and how this yield is correct as it is high i.e. 6 %. Kindly clear this calculation as it may impact the intrinsic value of any stock to a great extent.
edited February 27
You wouldn't want to use a 3 month time period because your trying to discount cash flows out further into the future. Typically a 10 year yr time period is the bond rate that is selected. A way that Professor Damordaran does it would be this...
The ten year bond rate for Indian ruppee is 6.40% in January 2017. So, we look to moody's and they give them a rating of baa3. So we could say that 6.40 is not quite a risk free considering AAA would be default free. We want to subtract out what is risk in the rate. So if we use the typical default spread of baa bonds we would have 2.54.
We would use 6.40-2.54= 3.86% as your risk free rate.
The 2.54 is what is counted as default risk within the rate. Remember the point is to have a "risk free" rate so we wouldn't want to use the 6.40 because it isn't risk free. Once we subtract out the 2.54 that is what is considered the risk free rate.
To get the 2.54% I used Professor Damodaran's chart he updates every year which gives the us the default spread for baa3 bonds.
We take the 6.40-2.54= 3.86% is the risk free rate for india.
There is a few different ways to do this, but 6.40 would be two high of a rate.
Thanks kavanaught6. ......well so in this case for calculating the intrinsic value of any stock , I need to take 3.86 % as the rate as per current year rating of baa3 bonds as per professor Damodaran rating.
Kindly clear a bit.
Hi, i want to know that how I can make use of intrinsic value calculator for Indian stocks as the intrinsic value calculator (
) takes inputs in dollar only and what will be alternatives of 10 years federal note rate for India stocks?