I have sold my position in VaxGen at $.64/share. I originally opened my position in VXGN in August for $.54share because it was a Net Net stock whose potential was actually in the $.78-$.90 share range. Actually I sold out on November 18th, using a limit order at $.64 my return was about 18% in a little over three months.
I promised a couple of readers a version of the DCF Spreadsheet I use to help evaluate long term picks. I decided to offer it to anyone who can use it, i.e. Mac users only. Remember, if you use the free DCF spreadsheet do not base any investment decisions solely on a spreadsheet.
Those of you in the United States, enjoy the holiday. For those those outside, this is a holiday called Thanksgiving, my favorite Holiday of the year. I will post again tomorrow.
Discounted Cash Flow is a way of estimating the current value of an investment in today’s dollars based on assumptions of future growth of cash flows discounted back to the present. This is a vital concept to understand for valuing long term investments, not just in stocks but Real estate, businesses, etc. Once you have determined the value for an investment you compare it to the current price to help you decide whether it is worth investing in. One can easily mislead oneself with the incorrect use of DCF.
One of the premium services that I have subscribed to is GuruFocus. Although the site is known for tracking the trades of famous and the not so famous, but perhaps, interesting investment “guru’s”. I am not much of a follower. If you are a value investor you are probably by nature also slightly contrarian. Of course, if the numbers add up for you it doesn’t hurt to have a Seth Klarman or Marty Whitman on your side. And I will analyze some companies that one the greats is interested in. I found Facet Biotech (FACT) this way and profited more than 70%.
Strangely, it never it occurred to me that anyone would be interested in a Mac spreadsheet for valuating a company based on DCF. I created my own because I could not find one on the internet, so I incorrectly figured no one really used a Mac in this world, but me. Where as the entertainment business is a Mac dominated industry, finance seems to be PC dominated industry and for good reason. Microsoft sucks ( I am not being harsh) at porting Office for Mac. It stripped out some of the most useful features in the excel version for Mac and has no intention of adding them in the future.
Anyone considering investing money in a premium investing service remember should be mindful of two things. For a beginning investor the important item is whether or not a service fits your investment philosophy. In makes little sense to pay money for technical trading tips if you are fundamental investor. Second, and this is important for the small money investor, make sure the service is worth the money
This is the latest in my on going series of Beginning Investor Terms. Free Cash Flow (FCF) is a similar concept to Warren Buffett’s idea of “owner earnings.” It is an important concept in value investing largely because it is often a preferred bit of a financial data to Earnings.
If you are going to invest in a company you need to collect data about the financial workings of the company.For the Excel users on the PC platform I recommend Old School Value’s free spreadsheet for Net Net’s and his premium (read not free, although a good value) Discounted Cash Flow spreadsheet
One of the ways you can find investment ideas is to look in the toxic waste stocks. Not literally of course. No, I refer to stocks that have taken a dive bomb in price. This morning I was looking at Google finance and I saw that Poniard Pharmaceuticals (PARD) had tanked a fantastic 75% on news that its lead drug candidate was rejected?keep looking »