What are investors saying about Value.able?

110 Comments

1. 

   james
   February 16, 2016 at 3:47 pm:

   Hi Roger.
   Do you have examples of how you would determine the Intrinsic Value of say TCL (Transurban an infrastructure stocks, ie the example in my previous post) ???

   The other example I would like to pursue is for the likes of a fund manager like ARG ???

   How you get these to a common base so that we can compare apples with apples.

   Regards JC……

   • 

     Roger Montgomery
     February 16, 2016 at 4:49 pm:

     For TCL you could start with a cash flow estimate and then a return on equity before valuing the equity if using an excess return model. ‘Common bases’ for wildly different businesses may in fact not be the goal. Better perhaps to think first about the economics of the business and get to a cash flow number that more accurate reflects the economic profit. Then you have a starting point upon which valuation models can be applied. Without a second book it will be a challenge to get it all down.

2. 

   james
   February 6, 2016 at 1:20 pm:

   Hi Roger.
   I have the book and using Chapter 11 to determine Intrinsic Value. Please note I am non commercial (and an engineer). At first I was perplexed why I need to nominate a “Required Return” to gauge a value from that sea of data. Currently I simply only used 10% and treat the process a simply a means of comparison and monitoring over time.

   Are there any conditions that arise that you think that I would have a legitimate need to vary this from 10% ???

   Also, I read some where in this “Blog” the reason why this process (“Intrinsic Value”) is deficient where it comes to the likes of ARG (AFI and possibly MFG). This was mainly to do with their reporting structure where the dividends of the holdings are reflected as the earnings of the fund (without consideration of the retained earnings within the holding).

   Is there any discussion available about the fallibility of this Intrinsic Value process ??

   Also (and possibility related to the previous question), I was crunching the numbers for TCL (Transurban). The dividends are >> earnings.

   This issue seems to effect the validity of the Intrinsic Value process ??
   and how is it possible for this case to occur in the first place for so many years running ??

   Regards JC……

   • 

     Roger Montgomery
     February 8, 2016 at 4:30 pm:

     There are limits to any estimate of intrinsic value. It’s essential you remember that intrinsic value is just an estimate. The limitation of the model in Value.able is the fact that it is a straight line model. That limitation is discussed in Value.able itself. With respect to discount rates the number you use can be related to risk free rates and equity risk premiums that may be derived from the weighted average cost of capital. Sometimes however it is simply and perhaps just as effective to adopt a number that approximates the return you want rather than the one you think the market is using. When it comes to TCL and other infrastructure stocks, there are a couple of issues. The first is that depreciation overstates the cost of maintaining the roads. Therefore the cash flow is much higher than the earnings. When calculating intrinsic value, one would adopt a return on equity based on the cash flow. The second point to note is that the discount rate used in the market to value these securities has been very low because the natural owners of these assets are large global pension funds who are seeking returns of inflation plus a percent or two. So the buyers required return is very low currently. Further, the market generally values these assets highly because the WACC formula applies a low rate of interest to the debt and the debt is a large proportion of the capital. The end result is a very high price when interest rates are low. Investors however only have to wait to see that while these securities will hold up the longest in a bear market – and may be the last to fall – they are not immune to declines. During the GFC, the price of Sydney Airports fell from $4.48 to $1.45. Today’s price of $6.50 is not permanent either.

3. 

   amit.raisinghani.96
   January 16, 2013 at 10:51 am:

   hi. roger

   i m from india. i would like to grab a copy of your book.. can u please explain the procedure..

   and is it available in india and US.

   • 

     Roger Montgomery
     January 22, 2013 at 5:18 pm:

     Hi Amit,

     Just go ahead and order here at the blog. Click on the link at the right of the posts on the homepage.

4. 

   Kumar
   May 19, 2011 at 3:13 pm:

   Hi Roger,

   I am fairly new to investing and just wondering if this book would be for me as I am worried about not understanding some of the terminology?

   Thanks

   • 

     Roger Montgomery
     May 19, 2011 at 5:42 pm:

     Hi Kumar,

     I will let a few of the “locals” here at the blog who have read Value.able, describe how it has helped. Personally I think it will be beneficial, but don’t ask the barber whether you need a haircut.

     • 

       William Gill
       May 19, 2011 at 7:31 pm:

       HI Roger /Kumar
       Since retiring from small business several years ago I have been a very sucessful investor, I have read a number of investing books, and I believe Valuable is the simplest and easiest understood investing book of all.
       After reading Poor Charlies Almanac I also believe Rogers ethics are the equal of Charlie

     • 

       Roger Montgomery
       May 19, 2011 at 9:49 pm:

       That is very kind William. Thank you and I am delighted to hear you liked it.

     • 

       Ash Little
       May 19, 2011 at 7:37 pm:

       Hi Kumar,

       Roger has the ability to explain complicated things in a simple way .This is a rare gift.

       I have recommended the book to countless people and have loaned the book to countless others. For every one of those that have read it they have all got something out of it.

       It is a very easy read and unlike the name it is not value.able it is invaluable

5. 

   Timothy
   February 23, 2011 at 3:12 pm:

   Hello Roger,

   Just started reading your book and absolutely love it! I reckon it’s gonna change my whole perspective on sharemarket investing.

   I’ve got a quick question regarding pg 69 where you mention the company’s profits will rise by $1.40 from $20 to $21.40.

   How did you calculate this increase in profit of $1.40 exactly?

   • 

     Roger Montgomery
     February 23, 2011 at 8:19 pm:

     Hi Tim,

     Delighted to hear you love the book. Its based on the Return (on the new equity) remaining constant.

6. 

   Prasad
   February 14, 2011 at 4:00 pm:

   Hey Roger,

   I’ve already read other books on value investing and followed couple of your investor hour seminars. Is there anything new in the book?

   • 

     Roger Montgomery
     February 15, 2011 at 12:19 am:

     Hi Prasad,

     Value.able presents new and original material, new and original ideas and new and original insights.

7. 

   richard
   December 14, 2010 at 5:30 pm:

   Hi Roger

   Just received the book. Cannot put it down and will read it more than once. Wish i had this resource rather than rely on brokers past comments to buy/sell a stock. I will rely on ROE/profitabilty for my future investing. All makes sense!!!!!!!!

   • 

     Roger Montgomery
     December 14, 2010 at 9:56 pm:

     Delighted to hear it Richard. Thanks for the very encouraging words.

8. 

   Bill McGeachie
   September 28, 2010 at 10:47 pm:

   Hi Roger,

   I really enjoyed your book. I am delighted it has been written as I always wondered how to determine the value of a listed company. I will try to put it to good use. I also enjoyed your recent slot on Switzer and the portfolio you are monitoring. I suppose the proof of the pudding will be in the eating ! Keep up the good work.

   best wishes

   Bill McGeachie

   • 

     Roger Montgomery
     September 30, 2010 at 12:14 am:

     Hi Bill,

     Thanks for the encouraging words. SInce there are a few portfolios running with very good eating, I am not too concerned. Of course no-one can forecast what share prices will do in the short term.

9. 

   Stephanovic
   September 28, 2010 at 4:07 pm:

   Just finished! I wish I could have read this 10 years ago.

   For clarification; you use cashflow as opposed to published earnings to judge company profitability but when it comes to working out the dividend payout ratio do you use published earnings or your cashflow claculation agains divs per share?

   Cheers

   • 

     Roger Montgomery
     September 28, 2010 at 9:33 pm:

     Hi Stephanovic,

     You can use either but be consistent. Expect the universe to shrink when using cash flow.

10. 

    Steve
    September 24, 2010 at 9:10 pm:

    Hi Roger

    Although it’s taken me a while to get around to it I’d like to share my thoughts after reading Value.able. I read the book as quickly as I could and found it so interesting that I couldn’t put down. I would rate it as the best and most practical book about investing that I’ve ever read. A definite A1 and a bible of how to be a successful value investor rather than market gambler.

    The greatest message I got from the book is to look past the short term madness of the market and simply focus on buying only the best business at cheap prices. In the past I’ve hoped to do this but I didn’t really know how. I relied on broker’s research and ratings, plus a few times looking at price graphs and mistakenly believing a business is “cheap” just because the price has fallen. While this often worked I put it down to luck as I didn’t really know what I was doing. Before reading Value.able I really understood only the basics of separating a good business from a bad one and had no idea about determining a good buy price. I’ve also found that many brokers and advisers shouldn’t be listened to and you really need to do your own research. I think your comment in the book that brokers and advisers often recommend investments just to generate fees is spot on. All investors should learn how to do their own research and not rely blindly on advice. For me, Value.able is the perfect research tool and a way to avoid bad advice and high fee costs.

    Value.able was exactly what I’ve been looking for to fill in the missing gaps by teaching me how to buy quality businesses and great prices. It has given me an easy to use methodology to estimate intrinsic values before making a purchase to avoid the guesswork. After review my current portfolio, I find the information and methodology in Value.able checks out. All my best performing stocks all have high ROEs and were purchased near intrinsic values. The worst performers all have the many negative characteristics outlined in Value.able, such as low ROEs, capital raisings, goodwill write downs, poor management etc. I will hopefully avoid such dogs in future and the advisers enthusiastically recommending them.

    Apart from the intrinsic value methodology, I also enjoyed your tremendous insights into how good businesses operate to help spot the highest performing and healthiest businesses. Chapters such as the one on cashflow were great, plus the arguments against relying on only traditional P/E ratios. This stuff can be hard going but the book explains it very well with many interesting examples of well known Australian companies. The post mortem on ABC Learning was fascinating and is a valuable lesson on avoiding bad businesses. This information will help investors to avoid the future corporate collapses and poor long term performers like Qantas and Telstra.

    After reading Value.able I’m confident I will make smarter and less riskier investment decisions in future with a greater chance of success whilst avoiding the market dogs. Value.able has given me a huge boost in my ongoing quest to become a more successful investor. A must read for all investors!

    Steve

    • 

      Roger Montgomery
      September 26, 2010 at 10:25 am:

      Hi Steve,

      Thank you for your very encouraging feedback. I am delighted to hear that you liked the book so much. Don’t forget to seek and take personal professional advice too.

11. 

    Mick
    September 9, 2010 at 9:18 pm:

    Roger & Friends – a lttle Value.able help if possible please?

    Confused here! I can’t get the reasoning behind some numbers in Value.able Page 108, paragraph 2, discusses some Wesfarmers per share stats:

    Equity: 21.28 Intangibles: 17.82 NTA: 3.46 Borrowings: 4.61

    Para 3 then says “On a per share basis, shareholders own 21.28 of the business, but they owe 13.19”. Where does the 13.19 come from? I can’t get my thinking around why they ‘owe’ that amount when ‘borrowings’ are mentioned as 4.61?

    If shareholders ‘own’ 21.28 and ‘owe’ 13.19, then it seems like on a nett basis a shareholder would own 8.09 (21.28 – 13.19) Is this because they ‘own’ the NTA and the debt/ Borrowings ie 3.46 plus 4.61 = 8.07? (rounding)

    So Equity – NTA – Debt = ‘Net Ownership’??

    Or should I be thinking Intangibles less Debt ie 17.82 – 4.61 = 13.21? (The maths adds up but I can’t figure out the reasoning; kind of the same thing really)

    As Intangibles are generally ‘purchase premiums’, is it an accounting thing whereby Intangibles are sort of classed as ‘soft liabilities’ on the balance sheet, and reduced by taking on ‘hard debt’?

    Methinks I may be bamboozling myself – and/or I may just need a maths lesson! Thanks for any help in advance :)

    • 

      Roger Montgomery
      September 12, 2010 at 11:28 pm:

      Hi Mick,

      I have quite a simple answer to your Wesfarmers conundrum; one is “borrowings” and the other is “Total Liabilities”

      • 

        Mick
        September 13, 2010 at 2:07 pm:

        Thanks Roger

        I might just need to get my terminology straight – I was working under the impression that borrowings and liabilities were the same thing?

        I have seen ‘short term’ and ‘long term borrowings’ bandied about and thought they were interchangeable!

        Are ‘borrowings’ just another name for short term (current) liabilities?

      • 

        Roger Montgomery
        September 15, 2010 at 12:12 am:

        Hi Mick,

        Borrowings are interest bearing loan liabilities. Liabilities include everything else (long term and short term)

      • 

        Mick
        September 15, 2010 at 12:47 pm:

        Cheers Roger

        Just so I’m clear, Total Liabilities less Borrowings = non-interest bearing loan liabilities; that would be items on BS such as A/C Payable and Deferred Tax?

        May I also ask what your thoughts are on what constitutes debt? Is total debt = total liabilities?

        I have read that some analysts classify bonds as ‘debt’ while loans are ‘liablilities’, so where does that leave borrowings in your mind – are bonds included in borrowings due to coupons paid? (Discounted notes too?)

        And what of preference shares – they are often considered more like bonds than shares, so do you include them in borrowings as well?

        Many, many thanks yet again!

      • 

        Roger Montgomery
        September 18, 2010 at 12:03 am:

        Hi Mick,

        Phew! DIfferent definitions seem to exist for these things. You may also find slightly different labelling in alternate company annual reports. Just use those. There will be notes that will also help explain. I have not seen bonds called debt and loans called liabilities exclusively. The terms of the prefs will determine how they are treated but so will the auditors ultimately.

12. 

    Peter
    September 1, 2010 at 9:13 am:

    Hi Roger,

    Just looking at my company half year report and was wodering if a more acturate ROE was to just calculate the difference between total equity from year to year rather than profits..?

    • 

      Roger Montgomery
      September 3, 2010 at 10:37 am:

      Hi Peter,

      regarding just using changes in equity: Keep in mind, dividends may have come out and there may have been capital raised or shares bought back which will increase or decrease equity respectively and there may have also been changes/revaluations put through the ‘reserves’.

13. 

    tom
    August 23, 2010 at 5:20 am:

    Roger

    Just received the book………absolutely loved it and will be buying more for friends and family and have already sent emails out to my investment group to purchase the book.

    Not long ago you posted answers to a series of questions and one answer struck me when you talked about the tables found in chapter 11. Such a wonderful collection of work I’d imagine there are a lot of people trying to dissect your work…..i don’t care about the formula one bit. What I was wondering was if you could post the entire table. Currently it goes up to 14% required return….would it be possible to see up to 20%? or possibly down to 5%?

    With the shenanigans our central banks are playing all over the world, we are either heading into great deflation or hyper inflation in the up coming years. In either case 8% and 14% will not suffice.

    I want to thank you and congratulate you on a wonderful book. Your fans are a tribute to your hard work and after years of having to explain investing to friends, I finally have a book to throw at them that covers it all.

    Great work!

    TOM

    • 

      Roger Montgomery
      August 24, 2010 at 8:54 am:

      Hi Tom,

      I have had a few requests to expand the tables. Let me think about how to do that so that only investors who have bought the book can receive it. You should read my comments in Chapter 11. WHile I expect some people to dissect the formula, they are seeing the wood for the trees. I mention that the formula has flaws and for this reason I adopt a different model. Its an excellent model but like so many its just not perfect.

      • 

        tom
        August 24, 2010 at 11:49 am:

        Thank you for taking time to respond to my note. I’m on my second run through the book and it truly is fantastic.

        May I suggest that you simply email the table out to the emails that we provided to you upon purchase of the book.

        I greatly appreciate your level of commitment to your followers and although the book will lead me to some great investments down the road, i can’t help but think that ultimately this purchase will rank up there as one of my best investments.

        Cheers

        Tom

      • 

        Roger Montgomery
        August 24, 2010 at 4:05 pm:

        They’re great sentiments Tom. I am very grateful for you sharing them here.

14. 

    Russell
    August 17, 2010 at 6:06 pm:

    Roger,

    I am up to about Chapter 4 in your book this is my first read and I will start over when I finish it.
    There is much to absorb in your book.
    I think it true that I have made every mistake so far detailed in the book.
    I have repeated some mistakes many times !!!!!

    I was born 1928 and bought my first shares at about 22 years of age and later lost that money.
    Retired 1984 with money invested in 35 fund managers. Lost 5 years of gains in 1987 crash.
    Only one company recovered in 6 months (BT who had hedged their fund)
    Decided to manage my own money and have been very successful and lucky.

    I had and still have a discipline and a criterion for buying shares.

    First to get rich slow rather than aim to get rich quick.
    Second to aim to reinvest 50% of income to give compounding a chance to do its magic.
    Third never to be swayed by “hot tips” or analysts but rather decide for myself what to buy and sell.
    Fourth generally buy to keep and hold most stocks held for a decade. I probably tend to keep losers too long.
    Fifthly always try to have 90% in “Top 100” and mostly buy shares with full imputation credits.
    Sixth have regard for taxation consequences (CGT) and sell winners when able to offset capital gains with capital losses.
    Seventh look at graphs covering share price also dividends for a decade or so. Look at liquidity in volume of shares traded.
    Eighth never buy shares that I must sell on a set date to repay a loan. That set date will turn out to be the lowest the share has been in a decade!.
    Ninth hold about 20 shares
    Tenth never to panic no matter what is happening in the market. History shows the market always recovers from a down-turn. To me share trading is a challenging hobby. A lot more fun than playing on poker machines!

    My rules seem likely to change after reading part of your book and seeing much of you on TV and UTube.
    I am sure you have a better way to buy/sell shares.

    Thanks for what you are doing to promote Intrinsic Value
    Regards

    Russ

    • 

      Roger Montgomery
      August 20, 2010 at 12:58 am:

      Thank you again for sending those ideas through on the blog. I am delighted you were able to do that as I thought they were wasted being sent only to me via email.

15. 

    Cody
    August 17, 2010 at 12:12 pm:

    Hi Roger i have read your book , and it is by far the best investment book i have read . i read it a bit to fast so i have to read it again .
    only wish it would of been available 14 years ago .

    i really like the way you explained company debt competitive advantage return on equity organic growth
    and using analogies to explain ,even the effect of inflation on savings
    and increase in earnings does not always men increase in roe
    the way you use the bank account returning 20% to explain what you would maximum pay for the account is just one of the good ones

    i will write a proper review and post it on your blog

    Roger this could be the best 49 $ i have spent, if it does not make me any money .
    I am sure it will protect me from making stupid investments in future , and i have made my faire share ,
    you have a gift in explaining the complicated simple and explaining so people understand . i am not an educated person and my english is not the best
    your book gets an A1

    Best reg Nevada Cody

    • 

      Roger Montgomery
      August 17, 2010 at 2:21 pm:

      Thanks again Cody. Really appreciate your kind words and for sending me the equally supportive emails.

16. 

    Brian
    August 12, 2010 at 4:51 pm:

    You can find eps and dps on comsec if you go to company info then
    company wrap on the right of the table in black.

17. 

    Sean Saul
    August 12, 2010 at 9:00 am:

    Hi Roger

    Just received and read your book and will read it again so it sinks in! A bit concerned about some stocks in my current portfolio so will have to run your valuation rule over them and make some tough decisions possibly. Followed you for quite a while so although my stock picking methods have differed greatly from your valuation model I have some of the A1’s and great businesses that you espouse and not too many duds (Good luck or Good design?) Love how you de-mystify what others spend a lot of time trying to shroud in mystery. A lot of very intelligent people lack basic common sense and it seems to me that is what you try to apply in conjunction with intelligence and knowledge; so congratulations. As an accountant I resemble some of your comments re: accounting goodwill and book values! LOL. They can be tenuous and rubbery at best sometimes. Thanks for sharing your knowledge.

    • 

      Roger Montgomery
      August 12, 2010 at 9:39 am:

      Thanks for taking the time to pass on that feedback Sean. Be sure to get personal professional advice (if you need to) before doing anything drastic!

18. 

    Carl
    August 11, 2010 at 1:24 pm:

    Hi Roger

    Just managed to finish your book Value.able.

    Well I have read a lot of different books and materials that twaddle on about a lot of different approaches and formulas. That some how miraculously predict what markets are going to do and how I will best profit from them. But your book it takes the cake! Why? Because it is nothing like any of those books I have read before! (other than material about Warren Buffett or Charlie Munger).

    This book I thought was extremely well written and put together a most rational and almost too simple approach to investing. And everything that was opinionated made plain old sense. I am still a little confused why companies and investors have not taken to Value Investing as being the only superior way to maximise returns over a lifetime of investing. I suppose a conflict of interest exists, due to Value Investing’s need to buy and hold a business for a longer duration has market makers, not so happy for 2 reasons.

    Firstly, they make incremental revenues from activity, not passive investment. So holding onto to a stock forever is not good for their business as brokers. And secondly with Value Investing, even buying has a real need to sometimes wait long periods before any acquisitions make sense exercising. This is also off putting to most brokers whom would rather tell you about a great stock and get you to trade sooner.

    I think their is some greater body that influences our university’s to teach that active trading and this way of thinking about a stocks value is a practical and rational manner in which one should adhere too. I studied accounting several years ago and was taught how to prepare and understand financial statements. Then next they also taught you how to value stocks, using statistical and discounted cash flow models like you discussed in your book. I now question why did I not question these later subjects on investment, when I already should have known it did not make any sense from the point of view as an accountant?

    I am also suffering from major cognitive dissonance! Because I spent years studying and believing all of these concepts as having relevance in a investment framework. The costs of which for subjects, books and time was huge. I think it could of been a lot better spent on buying some extraordinary business’s below what they are economically worth ( with a decent holiday away attached).

    I noticed what I believe to be a mistake in the figures for Table 9.1 on ABC’s cash flows. Was this a deliberate mistake to see if anyone was actually reading the tables or not? Or have I just interpreted your table wrong. For example Net operating cash flows Jun-99

    Receipts 8

    Payments -6

    interest paid -1

    (8 – 6 – 1)= 1 you had 0

    I also did not find the gold you were talking about in your blog? However I then discovered that the real gold was saturated across the pages throughout the whole book!

    Once again it was a great read. I think it has opened up a new way of thinking for me in my endeavors to become a successful investor. However I still require a book that explains how to finance a portfolio of extraordinary business’s, trading below their intrinsic value! Ha Ha!!

    With regards,
    Carl

    • 

      Roger Montgomery
      August 11, 2010 at 6:50 pm:

      Hi Carl,

      Thanks you ever so much for taking the time to write such an engaging post. The difference is just rounding but thanks for pointing it out. You have indeed found the gold!

19. 

    Mick
    August 11, 2010 at 12:45 pm:

    Roger – so sorry for the tardy reply, had a bit of reading to do as it happens!

    Yes Value.Able arrived safely thanks, and it is all I thought it would be and so much more…

    Now you have to cop some appreciative thoughts and thanks – as you’re humble, perhaps take it as feedback if you’d prefer; thanks nonetheless!

    Cover
    Yep, the coin looks great – and so does the $100 as the title background; another great touch. I have taken the cover off for posterity, but have to say the green/silver is potentially better than the flash cover for mine – sorry! That clean, simple look reeks of knowledge; gives it a kind of classic, scholarly feel; fit for a king’s library sort of thing. All class mate.

    ‘Side-notes’
    I’ve never read a book that had that much blank width at each side of the outside of the page – superb! No moving fingers to read a sentence; no smudging while turning pages; and I hate when half the page is taken up with footnotes below – it’s like trying to read 2 books at once.

    I did find the italics for the sub-headings within the chapters a little harder to read (my eyesight is good); too thin and too light for me to really stand out; it doesn’t matter though, as I was going to read every single word over and over anyway! No offence intended at all, just my thoughts.

    Content
    I’ve followed you for what seems a long time now, and researched all the hints you’ve dropped (Richard S, James Walter etc); as a result, I pretty much had the basic formulas but no idea of how to combine them – some the pieces of the puzzle, but no vision of the picture to be completed.

    The tables throughout were very helpful for my understanding, and although I would have loved the formulas in the book, I’ve got them nutted out and spreadsheeted so all good there. In a funny way, the numbers weren’t so much the drama, the conceptualisation of the big picture was – this is the real strength of Value.able in my opinion.

    Tiny phrases seemed to create a plentitude of ‘a-ha’ moments for me, especially implied growth and economic goodwill – I think your explanation re goodwill is better than Warren’s appendix on the same topic! In short, it filled the gaps in my understanding that I needed, and answered the questions I wasn’t going to bombard you with via blog and email.

    You have implanted a ‘financio-mental frame’ in my head; whenever I see a $1 coin now, I think of A) Value.able; B) the lessons that $1 coin taught me while waiting for the book (time/patience/frustration management); C) investing $1 with a view to obtaining at least that in return.

    Congratulations on Value.able; thank you for your attitude and humility; and looking forward to your future thoughts and efforts – I will be watching with great interest.

    Cheers,

    Mick

    PS Did you send Warren a copy?

20. 

    george white
    August 10, 2010 at 5:55 am:

    roger i am a kiwi. was going to watch the all blacks beat up aussie but your book made me miss the game and who cares i am on my second read just luv it knowledge is wonderful

21. 

    Elizabeth Pryce
    August 7, 2010 at 12:28 pm:

    Dear Roger,
    Thank you so much for the special edition of your book which I received last Friday. As you know , I have been a “Roger” groupie (even tho’ an ancient one !) for a good number of years and am so delighted to have your book. As a fellow member of the ASA said the other night- if you every decide to run a seminar we would stand in line. Please don’t make it until after the 14th.October. All good wishes to you and your family
    Kind regards
    Elizabeth

    • 

      Roger Montgomery
      August 7, 2010 at 1:14 pm:

      Hi Elizabeth,

      Its was lovely to see you last week. Thank you for letting me know you received my book and I really look forward to seeing you again.

22. 

    FC
    August 6, 2010 at 11:33 am:

    Hi Roger,

    Congrats on the book, brilliant effort! I am reading up and trying some of your calcs now.

    You used foreacsted ROE for your JBH example. Forecast ROE info is quite hard to come by, at least for me. Could I just use forecasted EPS / equity for current year to get forecasted ROE? That sounds ok in theory, but I have that odd feeling I am double counting somewhere.

    Is it possible for you to set up a side forum on this blog where we can ask questions on our calcs? Like a Q&A forum specifically for calculation queries. Just a suggestion..

    • 

      FC
      August 6, 2010 at 11:39 am:

      Then maybe what will happen is ppl will visit hotcopper for rumours and visit your blog/forum for some good “meaty” information.

    • 

      Roger Montgomery
      August 7, 2010 at 2:58 am:

      Hi FC (could you leave your name too?)

      Yes you can estimate ROE that way. I am currently writing a bunch of practice examples for you to compare your calcs against. Stay tuned.

23. 

    Steven
    August 6, 2010 at 10:41 am:

    Thank you for writing value.able. It’s enlightening. But it seems that whether a stock is a value buy hinges entirely on the selection of the payout ratio. Take your JB Hi Fi example; if a 100% payout ratio is selected instead of 50%, the intrinsic value will become 10.73. And that rules out JBH as a worthwhile investment to pursue. The same conclusion can be drawn on all of the 20 blue chips I have tested using Table 11.2. amongst which are BHP and the four pillars. Please can you throw some light on this observation

    Secondly please advise where I can access the latest ROE figures online. Currently I am relying info from ComSec and they can only provide 2009 data

    • 

      Roger Montgomery
      August 7, 2010 at 3:01 am:

      Hi Steven,

      Broker research has forecast ROE figures and there is plenty of that available online. ALternatively you could open an account with an online broker. I will chat to some of my friends and see what I can arrange regarding access to research for you all. Regarding the valuation being dependent on the payout ratio, this is both right and wrong. The valuation is dependent on all inputs. if you change teh discount rate, change the ROE or any other input, the valuation will change. CHarlie Munger was asked what made him such a great investor and he replied; my guesses are better than yours.

24. 

    John
    August 5, 2010 at 10:08 pm:

    G’day Roger,

    I have learnt a great deal from your book. The most important part for me is that you have set out the actual steps involved in the process and that you make yourself available in continuing to educate people.

    I would like to congratulate on the release of your book.

    Thank you very much for sharing your knowledge. I will now start doing some homework with this knowledge and attempt to value some of the A1’s.

    Kind regards,
    John

    • 

      Roger Montgomery
      August 7, 2010 at 3:01 am:

      Thank you John. Let me know how you go.

25. 

    Mark
    August 5, 2010 at 9:18 pm:

    Hi Roger

    I’ll like to inform you that I received Value Able in the mail yesterday and immediately started reading the book.
    Some late nights ahead immersed in the book together with writing notes during the next few weekends to fully develop an appreciation & understanding of value investing.

    I would like to congratulate you for sharing your wisdom and clearly framing the book in a very clear manner to assist people in identifying value stocks.

    Investment managers no matter where they are should be very afraid considering there is a new dawn of individuals who have purchased your book and together with the time required and the assistance given by your book to investing in stocks which are of value & will gain a far better return than the poor performance investment managers have dished out in managed superannuation funds over recent times.

    Once again thank you.

    Regards

    Mark

    • 

      Roger Montgomery
      August 7, 2010 at 3:03 am:

      I agree Mark,

      Watch out! Take your time and I have yet to put something together on portfolio construction, which is an equally important consideration.

26. 

    Doug
    August 5, 2010 at 6:57 pm:

    Roger; you have spoiled the party. No more overpriced takeover offers? Those that need to read Value.able probably won’t but of course if you already know it all why bother.
    Seriously though its been well worth the wait.Congratulations.

    • 

      Roger Montgomery
      August 7, 2010 at 3:05 am:

      Thank you sincerely Doug.

27. 

    John E.
    August 5, 2010 at 1:18 pm:

    Roger,Read the book.Gave me back enough ,zing,if that is a word ,to go back into business at which I started in London in 1968.After that I was in N.Y.C, H.K,and ABU Dhabi.A great constructive piece of work,Many Thanks to you,John

    • 

      Roger Montgomery
      August 7, 2010 at 3:10 am:

      Thanks John!

28. 

    Simon
    August 5, 2010 at 12:37 pm:

    Just finished the book, for the first time that is, superb, helped me decide to shoot a few of the dogs I have had hanging round my portfolio so I can invest the money (after the capital loss!) in a few a1’s (as I can begin to calculate them). Chapter 11 of this book will live long in Australian investors memories
    thanks again for sharing Roger
    si

    • 

      Roger Montgomery
      August 7, 2010 at 3:11 am:

      Thank you Simon,

      I really appreciate those kind words.

29. 

    David C.
    August 5, 2010 at 8:50 am:

    Roger

    Thanks for writing the book. By far the best investment book I have read.

    Have you sent a copy to Warren & Charlie.

    Thanks for all the references. Is it worth tracking down the original material you have referenced? is it easy to access?

    I would like to buy a copy for my brother. What is the best way to do this. If available what is the estimated delivery time?

    Thanks again.

    • 

      Roger Montgomery
      August 5, 2010 at 9:07 am:

      Hi David C.

      For those with an inquisitive mind, I think the original material is very rewarding. If you have the time go right on ahead and dig up the material online. Its all there. The Journal of Finance is wonderful place to start and the names of the authors to search are mentioned in the book.

      If you would like to order a copy for your brother, just visit http://www.rogermontgomery.com and order again online.

30. 

    Sinaway
    August 5, 2010 at 8:46 am:

    I have received your book Roger with many thanks. I would like to take the opportunity to congratulate you on your willingness in sharing part of your knowledge for those willing to take an interest in Value Investing. My first two trades were speculating on tips I had received on companies that did not fair very well. Since then a friend of mine introduced me to Benjamin Graham & Warren Buffett and I took an interest in Value Investing. This lured me to your blog and talks on the business channel. I have learnt a great deal since then and it shows, as my portfolio is now making returns. So thank you for helping people like myself on the road to Value Investing.

    • 

      Roger Montgomery
      August 5, 2010 at 9:04 am:

      Delighted Sinaway

31. 

    Heather Hillman
    August 5, 2010 at 8:22 am:

    Hello Roger
    You have made the KISS method your own! Never before have I kept reading, reading and reading a non-fiction book! Took lots of notes and resisited charging to the back chapter first. Now my biggest concern is how to get rid of all my duds . Again it’s sentiment which kept these shares in my portfolio – just kept waiting patiently for them to return to their former glory – a bit like hoping that an expensive dress which was a bad impulse buy will sudddenly look fabulous! No more sentiment.
    Book layout is great and it was worth the wait to ensure that there were no widows and orphons.
    There is an assumption that all your readers are paying 50% tax – I am a retiree with a SMSF so just keep adjusting the franking credits.
    Best Wishes

    Heather

    Thank you.

    • 

      Roger Montgomery
      August 5, 2010 at 8:31 am:

      Thanks for the wonderful feedback Heather. As much as possible I have tried to keep tax out of the equation because everyone is indeed on different rates. In valuing companies we discount the after-tax streams of cash.

32. 

    Shaun
    August 5, 2010 at 6:07 am:

    Hi roger,

    Loving the book, fantastic read!

    I’m loving all the Buffett quotes and I love that Netbanx example of people who get carried away… Top stuff.

    I’m looking forward to seeing your valuations for Woolworths, because I’ve been trying to calculate my valuation and I think either 1) I’m doing something wrong or b) my forcast data is incorrect..

    Cheers.

    • 

      Roger Montgomery
      August 5, 2010 at 8:32 am:

      Thanks Shaun. I am working on something that should help your practicing.

33. 

    Roger D
    August 5, 2010 at 2:58 am:

    Hi Roger,

    Just received my copy of value.able and read most of the introduction, can definitely see the graham dodd influences especially in the book structure. Will probably give it a thorough read over the weekend and tell you what I think.

    Hopefully this book is a great success and maybe we just might see some Roger Montgomery action figurines in the near future, you never know!

    • 

      Roger Montgomery
      August 5, 2010 at 8:34 am:

      Thanks Roger. I hadn’t thought of figurines! I wonder if kids will go for the Action Value Investor?

      • 

        Roger D
        August 11, 2010 at 10:35 pm:

        Hi Roger,

        In the ROE chapter I think you gave an example that went somewhat like this: A business with an equity of 100 is able to get a ROE of 40% as in make a profit of $40. During next year the business decides to purchase another company costing $40 that reaps a return of roughly 5% therefore the new ROE would be 30% [(40+2)/140].

        A 5% return is hardly impressive when factors such as risk, opportunity cost and inflation is considered. But lets now assume that the acquisition somehow reaped a return of 30% thus generating a new ROE of roughly 37.14%. It could either do this or give out all profits in dividends and still maintain its 40% ROE next year.

        Lets just assume that the company is unable to replicate its original ROE of 40% after its initial 100 in equity and a 30% return from the acquisition of company x is its best business option. What I don’t really understand is why giving out all of the company dividends to shareholders and maintaining a ROE of 40% is more valuable because a 30% return is much more impressive than what I would be able to do with it.

        Sorry for the elementary question but I am genuinely confused, thanks Roger.

      • 

        Roger Montgomery
        August 11, 2010 at 11:06 pm:

        Hi Roger,

        Do you want to go and check the example again? Let me know when you have. Once you start making assumptions, its not really my example anymore.

34. 

    Peter
    August 4, 2010 at 11:13 pm:

    Roger

    Congratulations on a well presented and brilliantly written book… still working my way through. When I read I can hear you saying the words. The message comes through very clearly, and brings together all we have heard you saying on Switzer and the blog.

    As for a workshop in Perth – brilliant idea. Perhaps think about it outside the ASX to allow for more flexible times and perhaps content.

    • 

      Roger Montgomery
      August 5, 2010 at 8:36 am:

      Thanks for the feedback Peter. Sincerely appreciated.

35. 

    Craig
    August 4, 2010 at 10:51 pm:

    Hi Roger,

    Started reading tonight and have just finished part 1. Really enjoying it. Page 044 – I take it you never got invited to many broker lunches in your fund management days ;-)

    Regards,
    Craig.

    • 

      Roger Montgomery
      August 5, 2010 at 8:37 am:

      On the contrary Craig!

36. 

    Daniel
    August 4, 2010 at 10:03 pm:

    Truly a great read, thanks for sharing your Value.able insights Roger. Can you please recommend any sites/sources in which to obtain analyst research?

    Cheers
    Daniel

    • 

      Roger Montgomery
      August 5, 2010 at 8:38 am:

      Hi Daniel,

      To remain independent I don’t recommend any third party information…with one exception. Morningstar’s Shareholder compendium contains up to ten years of data for the 500 largest companies. I believe it is published twice a year.

37. 

    David Maynard
    August 4, 2010 at 8:34 pm:

    In the course of my working life the best managers , i found , have been those willing to teach and better those they manager , offering them help and encouragement.You are to be commended for your genuine attempt to show people, like me , a better way to invest that is clear and concise.Thanks for the book.Regards.

    • 

      Roger Montgomery
      August 5, 2010 at 8:39 am:

      Thank you David.

38. 

    Peter
    August 4, 2010 at 1:49 pm:

    I have recently received your book, read it and finished it. I quite enjoyed it, thank you very much.

    Just a suggestion: we should all learn from mistakes, hopefully other people’s mistakes(!!). For example, I love Giverny Capital’s mistake de jour entries. Perhaps revisiting some mistakes from the past would make the book more complete.

    • 

      Roger Montgomery
      August 5, 2010 at 8:54 am:

      Hi Peter,

      A good idea Peter. I am happy to say the list isn’t too long. There are other general and well publicised examples – those that have triggered class actions, but for that reason they may be something for the next book perhaps? Once they’ve settled.

39. 

    Darren
    August 4, 2010 at 1:47 pm:

    Its so hard to be patient and l feel a lot like ashley although I didn’t think Adelaide was considered a rural area as I haven’t received my copy yet either!! I guess all good things come to those that wait……i really need your book to help me stop making bad (or is that stupid?) decisions and having my wife laugh at me – although her laughter usually turns to tears when i mention that its ‘our’ money i’m losing!

40. 

    Sean C
    August 4, 2010 at 11:35 am:

    Roger,

    Received my copy of Value.able yesterday. I experienced a number of ‘light-bulb’ moments whilst reading part one.

    Thank you.

    Regards
    Sean

    • 

      Roger Montgomery
      August 5, 2010 at 8:55 am:

      Great stuff Sean.

41. 

    Gavin
    August 4, 2010 at 10:13 am:

    Roger

    What is the formula behind table 11.2?

    Calculating the value of an infinite life asset that has a 100% retention rate and a ROE different to the required return is a mathematical impossibility.

    That you have produced a table with values for a mathematical impossibility implies that there are assumptions made via the formula to overcome the problem.

    In my opinion, these very assumptions are the most important element in valuing growth. Without the formula I can’t assess the validity of the assumptions.

    • 

      Roger Montgomery
      August 5, 2010 at 9:02 am:

      Thanks Gavin. I don’t believe that problem is solved but I do believe neat solutions exist. Most investors don’t want formulae that can be misused and which can also be rather intimidating. I have given you, in the book, the names of the celebrated thinkers upon whose formulae the table is based. Google will give you the answers you seek. Just type in their name followed by ‘valuation formula’.

      • 

        Gavin
        August 5, 2010 at 9:34 am:

        Thanks Roger

        Walters I’m familiar with – but his dividend discount formula for 100% payout doesn’t produce the same figures as your table.

        Simmons I’m not familiar with and I can’t find anything on him other than reference to his book which I don’t have and can’t find in Aus.

        Any other leads or perhaps you would be so kind as to send the formula to my personal email address.

        I understand your not wanting to complicate things, but I don’t see the formula as a complication but as a necessaity to understand how ‘you’ are determining the valuation for the retained component.

      • 

        Roger Montgomery
        August 5, 2010 at 10:34 am:

        Hi Gavin,

        I think you mean 100% retained. As I say in the book, the variation should matter less than the very large discount you should be seeking. Does it matter whether a 6’4″ man weighs 40 kilos or 45 kilos? No. He is clearly underweight. Its the same with valuations. Don’t get hung up on whether the number is $4.45 or $5.00. Buffett says if the price is $4.20, its too close to call. You should be buying at $2.00! Simmons work is useful for 100% retained.

      • 

        Craig
        August 7, 2010 at 1:47 pm:

        Hi Roger,

        Re table 11.2. At the bottom of page 184 you say you “made it more conservative”. It is possible for you to quantify how much more conservative, or comment otherwise?

        During the intrinsic value calculation process it is possible to build in conservatism by various means (for example, round down the company return on equity when selecting the relevant row to enter the table), which is fine by me. But when I come up with my instrinsic value, I’d like to know how much conservatism I’ve built in. I think this will help me decide how far I want the share price to fall below intrinsic before I pull the trigger and buy.

        Congratulations on an outstanding publication that sets a new benchmark in the quality I now expect from other authors going forward.

        Regards,
        Craig.

      • 

        Roger Montgomery
        August 8, 2010 at 8:39 am:

        Hi Craig,

        Thanks for the feedback. I am really glad so many people are finding it valuable (no pun intended). Regarding that table – which is causing some people distress. You can use a mathematical tool called a utility function although there are a number of other means of achieving the same result. Please don’t ask for the formula; I have already seen a website with a post that claims that my method is “almost exactly” like theirs! As I know of nobody globally that has developed anything that approximates it – I doubt that to be true. I have provided all the inputs you need to go and build it yourself, the sources of the basic version and the results. I note in Buffett’s, ANNual Letter to Shareholders he also provides the inputs but refrains from supplying his valuation for Berkshire or any formula.

42. 

    Matthew
    August 3, 2010 at 7:25 pm:

    the Charlie Munger quote dropped out of the post somehow…

    the quote was:

    It is, of course, irritating that extra care in thinking is not all good but also introduces extra error. But most good things have undesired “side effects”, and thinking is no exception.

    Look forward to comparing IVs!

    • 

      Roger Montgomery
      August 4, 2010 at 10:10 am:

      Nice Matthew!

43. 

    Tom
    August 3, 2010 at 6:52 pm:

    Got mine today, looking forward to getting stuck into it! Roger, do you have any plans to do a presentation in Perth in the near future?

    • 

      Roger Montgomery
      August 4, 2010 at 10:12 am:

      Hi Tom, Quite a few people have asked. I thought I was doing something for the ASX, if not I might run one myself. Do you think there would be much interest in a 2-hour hands-on workshop?

      • 

        Tom
        August 4, 2010 at 1:31 pm:

        I think there will be a mountain of interest Roger. If you hold one I’ll certainly be dragging a few of the ‘short term traders’ from my office along for some much needed education. Hope to soo you over here soon mate.

      • 

        Roger Montgomery
        August 5, 2010 at 8:55 am:

        Thanks for the encouragement Tom.

      • 

        Adam
        August 4, 2010 at 6:36 pm:

        Roger, I believe you would get considerable interest in a 2 hour workshop in Perth. Recieved the book yesterday, coming to work today stopped me finishing but I should do tonight. Thankyou for your efforts on putting it together, I can see from the comments you are recieving the wisdom is not falling on deaf ears which must be very fulfilling for you, congratulations

      • 

        Roger Montgomery
        August 5, 2010 at 8:45 am:

        Thanks Adam for taking the time out of your day to share with me your encouraging words.

      • 

        Anthony
        August 4, 2010 at 11:04 pm:

        Hi Roger

        Just recieved my copy of your book. My biggest problem now is to decide which bottle of wine I should open to sit back relax and read your book with.

        A two hour workshop in Perth would be great. If you come over that would be great and I certainly would be attending.

        Keep up the great work.

        Anthony.

      • 

        Roger Montgomery
        August 5, 2010 at 8:36 am:

        Thanks Anthony. I am thinking a Pinot.

44. 

    Eamon
    August 3, 2010 at 6:30 pm:

    Perhaps your book have unlocked, the ‘Holy Grail’ to investing!

    Eamon

    • 

      Roger Montgomery
      August 4, 2010 at 10:13 am:

      Hi Eamon,

      Thank you for your optimism. I don’t think there is such a thing as a Holy Grail in investing. There’s just sensible ways to approach the challenge and I think value investing and focusing on the businesses rather than the stocks, represents that.

45. 

    Ashley Little
    August 3, 2010 at 6:11 pm:

    I am very jellous. I live in a rural area have have not got mine yet

    • 

      Roger Montgomery
      August 3, 2010 at 6:26 pm:

      Your book is on its way Ashely. I guarantee it.

46. 

    Daksha
    August 3, 2010 at 4:00 pm:

    Roger,

    I got my copy yesterday. Started reading it straight away but I must admit after reading 30 to 40 pages I could not resist to go to the chapter on Intrinsic Value. Congratulations the way you have written it is so easy to follow through the calculations.

    I would recommend it to any one to buy the book and read it even though this the first investment book I have read, may be it will be the last one as your book has all the ingredients for becoming a “Value Investor” like you rather then worrying about daily movement in share prices which is going up and down like a yo yo at the moment.

    I regularly listen to you on sky business channel in fact I have become a great fan of yours. I really like your honesty when you say on the program that “I cannot predict the price of any company shares”. After reading your book now I understand why keep on using that phrase because now I know the difference between “value” and “price”. I am also impressed the way you have explained the difference between investing and speculating by giving so many live examples.

    Note: Roger with my copy there was no Tax Invoice attached in fact it had packing slip. Not sure what happened there. I would like to have a copy of the Tax Invoice please.

    Thanks and Kind Regards,

    Kind Regards

    Daksha

    • 

      Roger Montgomery
      August 4, 2010 at 10:16 am:

      Hi Daksha,

      Thank you for those very encouraging words. I really hope you get a lot out of the book. With regards to the TX invoice,it would have been emailed to you when you ordered the book.