If you are going to invest in a company you need to collect data about the financial workings of the company. Unless you are Warren Buffett, and you can decide whether you want to buy a company based on the scribblings on the back of an envelope, that will probably involve the use of a database. 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.The reason these are great products is that all you have to do is enter a ticker and the information is sucked from the internet for you. You save all that time typing and checking numbers like I do. Well, maybe.

I use something I developed myself that is exclusively for the Mac platform that includes more than DCF (discounted cash flow) information and I also have a Net Net evaluater. Yes, I have to hand input my numbers, but here is the advatage I have. Morningstar, where the information is derived from for the DCF spreadsheet, is often wrong or slow to update. How do I know. Because I have input the numbers from their website for dozens and dozens of companies. On small to microcaps, if they have the information it can often be a quarter late in updating info. Even on large cap companies I have noticed that some information will go missing and then return. Or get updated and completely change without a notice. I also have  dozens of  emails to Joe & Tony the guys at Morningstar who handle this problem, complaining.

Don’t get me wrong, I like Morningstar. I use them all the time. It is a great place to get mostly accurate information for ten years of data on a company for free. I like their easy to read layout. But that does not mean you won’t have to double check some of the work, or go to the actual 10Q or 10K of a company to verify information. You will need to go the SEC reports anyway to look for other items like footnotes that explain items that may not be clear in the financial statements and discover what the company is saying about itself. If I was on the PC platform I would  buy Jae Jun’s spreadsheets to save time on the initial work, and then check everything once I found an interesting company to make sure the number added up. Good luck investing!

5 Responses to “Checking your data before you Invest – Valuation”

1. Investor
   November 19th, 2009 @ 10:49 am

   Hi would you kindly share your MAC spreadsheet. I found your post after searching for months for a spreadsheet for the MAC. Everything available is normally for the PC. Except for the online site: quicken.com (the evaluator tool). Thank you in advance.

2. chroma
   November 19th, 2009 @ 12:29 pm

   Thanks for coming by chroma investing. I am currently updating both spreadsheets. What aspect of valuation are you interested in, Net Net stocks or a free cash flow based spreadsheet?

3. Investor
   November 19th, 2009 @ 12:43 pm

   Thanks for your prompt response. Tools to be able to do intrinsic value calculations such as:
   # Average high yield price
   # Pricing based on past X years relative price-to-earnings ratio
   # Pricing based on price-to-earnings ratio of X
   # Graham number
   I dont know if you find the same problem but as I have been using online tools with my MAC – you always get different numbers (e.g. to get the Graham number). For example, in some sites JNJ is overvalued and other sites* it is undervalued.
   Thanks

   * here are several sites:
   http://investing.quicken.com/research/evaluator.asp?symbol=JNJ
   http://www.stock2own.com/Default.aspx
   http://www.valuecruncher.com/
   http://investinvalue.com/
   http://www.grahaminvestor.com/

4. chroma
   November 20th, 2009 @ 10:31 am

   Sorry for the delayed response. This email got sent to spam. I will check out the sites you refer to see if I can detect the difference. Usually, it is the calculation of a particular item. Very small differences in input can yield very large differences in the output.

   I don’t have that much faith in P/E, but I do have a P/E vs. 10 year historic P/E which you could compare to the TTM P/E if you wanted. I do have a Graham number calculation. I will try to send it to you next week.

5. chroma
   November 28th, 2009 @ 9:58 am

   I have posted the slimmed down version of my DCF for mac.

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