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New book
Dear Mr. Hagstrom,
Why you don't write a book regarding the "Warren Buffet mistakes on Investment"?
I thyink it should be also a great book for all WB admirors, like me.
Congratulations for all your books, are really good.
Best regards from Barcelona (Spain)
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Essential Buffett
Dear Mr.Hagstrom,
We just published Essential Buffett in Serbian, we wouold like to see you at Belgrade Book Fair at promotion of book, end of Sep 2006
regards
Milan Pejic
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The Warren Buffet Way page 134
Dear Mr. Hagstrom,
I love this book. I fall asleep at night studing the concepts.
In the last paragraph on page 134, how did you calculate what the earnings power would have to be in order for a share price of $172.50 to be warranted? What are you suggesting?
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"Owner Earnings"
In The Essential Buffett I believe there are some calculation errors.
Reviewing the table on page 117 the years of 1973-1980 you say the compounded annual growth rate of Owner Earnings is 8% but I get a figure over 15%. I performed the same calculation for the years 1981-1988 and 1988-1992 and for the most part got close to what you had stated in your book. Anyways just wondering if there is an error in one of the numbers in the table for the years of 1973-1980?
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"Owner Earnings"
"Owner Earning" on page 117 seems to me quite alright with a little imprecission:
1973-1980: on the end of 1973 earnings were on 152 mln. In 7 years it grew to 262 mln. If you use formula: 152 * (1 + r) ^ 7 = 262, r = 0,080885.
1981-1988: if on the end of 1981 earnings were on 262 mln and in 7 years it grew to 828 mln, r = 17,8%.
It's closer to 18%. The rate equals 17% if in 1981 earnings were not 262 but about 275 mln dollars. It's not implicite in the text.
Would you agree? Or maybe I count something no right
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Pages 107 and Page 128
"The WB Way" (1994)
Sir,
(a) Page 107
The derivation of the $350M valuation <($13.3M /(.068-.03)> incorporates a nominal cash flow with a nominal required rate of return less a real growth rate. Is this a conceptually valid combination?
Please explain the derivation of the $135M valuation uplift (due to the enhancement of the pretax margin by 5%)...as the itermingling of Net Income and PreTax margin surely will cause a conceptual conflict.
(b) Page 128
Please advise as to the arithmetical derivation of the $666M valuation. The perpetuity with growth model only works if r > g....and here 12% nominal plays 15% nominal.
....or maybe I'm missing the obvious. Please advise in any event!
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Buffet Way-Second Edition
Mr. Hagstrom: I am not even a new investor yet. I'm in the process of studying quite a bit before I even decided to buy one share of stock in any company. I am reading your very interesting book. I am, however, at a loss in terms of the math required to arrive at the calculations needed in order to arrive a sound conclusion based on earnings, debt to income, equity, etc, etc. Can you direct me to another book where this is covered? I'm not very creative with numbers, so I need some direction. The second edition I'm reading doesn't give much direction in the area of equations and such. I'm hoping you can assist me, especially if you have already published something in this area.
Thank you,
Alexander Beltran
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The Warren Buffett Way 2nd Edition page 134
Dear Mr Hagstrom,
I do not understand your formula on pages 133 and 134. If the value of a business is the net profit after taxes divided by his standard 10% discount rate minus a growth rate works out well in the example for Larson-Juhl and the first example for Coca Cola but not in the other examples for a higher growth rate. Please explain with a few examples.
Thank you.
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