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Intrinsic Value

This is the first part of the article on Intrinsic Value and this is one field where a lot of research is to be done.

Intrinsic Value is quite an abstract concept but it is central to my philosophy of investing, which I have adopted from the investing genius Warren Buffet and his guru Benjamin Graham.
( If you are seriously interested in investing... I would highly recommend the book by Ben Graham - The Intelligent Investor. This is the book which took Mr. Buffet to his Guru.)

One of the most important publications in the world of investing is the Annual Report of Berkshire Hathaway. ( It's the company which Warren Buffet runs, and all the annual reports of this company are available to us on their site : www.berkshirehathaway.com ) Another interesting document on that site ( which every CEO/investor should read ) is the Owner's Manual.

Warren Buffet's definition of intrinsic value defined in one of these documents is : the intrinsic value of a stock is "the discounted value of the cash that can be taken out of a business during its remaining life."

Now that's a little too technical for "Techies" like us. We may have to keep space for further discussions on this in our next week's article too. But let us try to split which are the jargons stated by Mr. Buffet. They are :

1. the Discounted Value
2. the Cash
3. taking the cash Out of a Business
4. the remaining Life of the Business


It's very interesting to figure out the above four elements for the companies in which we are looking for investment opportunities. I would like readers of vibeindia to give names of companies in which they are looking for investment opportunities, so that we can put those companies to this test and figure out what do we mean by "Intrinsic Value" for those companies.

note : We may not tell if it is a good or bad investment, we will just try to understand the concept of "Intrinsic Value", which is core to Business like Investing.

to be continued next week.


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