Money and Finance
- Valuation Of The Week 1: A Tesla Test – By Aswath Damodaran
I taught the first session of my valuation class, that I previewed in my last post, today. As part of that class, I do what I call a “valuation of the week”, where I pick a company and value it and then post both my valuation (with the spreadsheet...
- Hussman Weekly Market Comment: Whipsaw Traps
With respect to Europe's perceived "solution" to its debt crisis, the 50% write-down of Greek debt is appropriate (better than 21%, but probably still light), but it's not clear that this includes a writedown of Greek obligations to "official"...
- Debt And Growth Revisited
Found via Simoleon Sense. With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship...
- The Double Edged Sword
When it comes to capitalizing a company management has two options: equity or debt. If you look across the publicly available companies you'll find all sorts of mixes in capital structures. Some companies like Visa (V) (Analysis Here) are fully...
- Introducing The Dividend Compass
When it comes to equity analysis, a lot of attention is paid to valuation -- and rightly so, as your investing career will likely be a short one if you consistently overpay for assets. Surprisingly, however, there's typically little attention paid...
Money and Finance
Apple: News, Noise and Value - by Aswath Damodaran
The net effect of these changes is that the value per share that I obtain for Apple is about $588, about 3.5% lower than the value of $609 that I estimated in early January. You can download the spreadsheet with my valuation of Apple. Again, make your own judgments and come to your own conclusions. If you are so inclined, go to the Google shared spreadsheet and enter your estimates of value.
If you are concerned about whether borrowing $50 billion will put Apple in danger of being over levered, I did make an assessment of how much debt Apple could borrow, by looking at the effects of the added debt on the costs of equity, debt and capital, with the objective being a lower cost of capital. I try to be realistic in my estimates of cost of equity (adjusting it upwards as a company borrows more) and the cost of debt (by coming up with a prospective rating at each dollar debt level and cost of debt at each debt ratio). If Apple can maintain its existing operating income, its debt capacity is huge ($200 billion plus) but even allowing for a halving of their operating income, it has debt capacity in excess of $100 billion. As with the valuation spreadsheet, you are welcome to download my capital structure spreadsheet for Apple and play with the numbers.
…..
As I see it, if I have Apple in my portfolio at $420 and the company continues to disappoint on every dimension (growth, margins, new products), I will have a boring stock that delivers billions in earnings and pays a solid dividend. However, if the company surprises by stopping margin leakage and increasing revenue growth in the smartphone market or by introducing the iWatch or the iTV, it will be icing on my investment cake. In a market, where my alternative investments are richly priced, Apple looks like a winner, to me. It stays in my portfolio, the price disappointments of the last few months notwithstanding.
- Valuation Of The Week 1: A Tesla Test – By Aswath Damodaran
I taught the first session of my valuation class, that I previewed in my last post, today. As part of that class, I do what I call a “valuation of the week”, where I pick a company and value it and then post both my valuation (with the spreadsheet...
- Hussman Weekly Market Comment: Whipsaw Traps
With respect to Europe's perceived "solution" to its debt crisis, the 50% write-down of Greek debt is appropriate (better than 21%, but probably still light), but it's not clear that this includes a writedown of Greek obligations to "official"...
- Debt And Growth Revisited
Found via Simoleon Sense. With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship...
- The Double Edged Sword
When it comes to capitalizing a company management has two options: equity or debt. If you look across the publicly available companies you'll find all sorts of mixes in capital structures. Some companies like Visa (V) (Analysis Here) are fully...
- Introducing The Dividend Compass
When it comes to equity analysis, a lot of attention is paid to valuation -- and rightly so, as your investing career will likely be a short one if you consistently overpay for assets. Surprisingly, however, there's typically little attention paid...