Principles of Valuation Part 2: How to Value a Business, And How to Think About Stock Prices

In Part 1 of this three-part series we focused on how to value slow and moderately fast growing businesses. In this article, Part 2, we will shift our focus on how to value faster growing companies. Our definition of a fast grower is one that has consistently compounded earnings at 15% per annum or better[…]

Buffett’s Burlington Northern Santa Fe Move: Foreshadowing the Growth of American Rail?

In late October/early November of 2009, Warren Buffett announced that Berkshire (BRK.A) was purchasing Burlington Northern Santa Fe Railroad (BNI). At the time, Burlington Northern Santa Fe was trading at just under 15 times earnings and offered a dividend yield of 1.9%. Even so, Warren Buffett received mixed reviews from the media. Some even went[…]

Principles of Valuation Part 1: Price Is What You Pay, Value Is What You Get

Why have these three stocks historically commanded approximately the same True Worth™ price earnings ratio? SCANA Corp. (SCG), a public utility, has a historical earnings growth rate averaging 3.2% per annum, VF Corp. (VFC), an apparel manufacturer, has a historical earnings growth rate averaging 7.4%, and United Technologies Corp. (UTX), an aerospace and technology conglomerate,[…]