u guys taking this example too seriously.. can't u guys just have a sense of humour and laugh at Bob Loudly's comment.. geez! he's just trying to make people laugh..
No she's not the winner even though she makes almost two third of what the owner makes. You forgot to factor in TIME. The employee can only get 20$/hr by trading her time with it. That's most she can makes.The owner could have 10 more ice cream stand running at the same time without needing to trade in her time! $200/hr, or even more! Sky is the limit for the owner.
Preston It's the second time I'm watching your videos, this time I'm writing things down and reading all the comments, description and actually thinking about what I see. So I want to thank you for the hard work put in this videos and for taking the time to make them. You are awesome and explain everything so well that even I can learn. Thanks again, I really hope you had a chance to meet Warren Buffett and he congratulated you for doing this.
Preston, Great video, In minute 14:17 the slide says: "Warren Buffett likes to find companies that trade for less than 15 times the earnings" Can you please give an example? Thanks
Here's what I think it means: $20,000 is net income (or earnings) per year, therefore 15 * $20,000 = $300,000 Therefore he's looking for businesses that cost under $300,000 making that net income. (at least from my interpretation, I think it's right.)
His main concern was before you buy a business or stock u gotta understand your return on your investment and don’t overpay by counting annual gains.. and how long would it take to get your money back you invest in business or stock.. you gotta use little brain here
The magic happens 13:18:00 the amount of money you pay, related to the return you will get back. In the example to get $20,000 annual. If you pay 400,000 you will get back 5% of your investment 200,000 you will get back 10% 100,000 you will get back 20% so do you rather get 5% back or 20%?
Im so excited to be an investor, I will do my absolute best to learn everything I can, Thank you Preston for this eloquent and articulate video, easy to understand, subscribed! Can't wait to see what the investing future brings me in the next coming years!!!
There are no words to express how valuable are this lessons.... Thanks fot sharing all this info and for the awesome clarity in which you explain everything.
But why would someone want to pay more for a smaller percentage return? And in the end, if you are making the 20k then won't you want to pay lesser so that you get a greater share of your money back? I'd appreciate help. Thanks
"Warren buffet likes to find companies that trade for less than 15times the earnings." Can anybody explain to me how he does that and what kind of companies are these?
TheDark Knut Too high (20-30 and higher) of a P/E ratio is fishy. Too low (1-9) doesn't make sense. It's explained in intelligent investor that P/E ratio of 10-15 is sufficient for a choice.
It's 2am, but off the top of my head, I like and also own MU (micron) . It's recent 20% drop to 48.00 makes it appear attractive. and p/e is well below 15. The downside risk is that it's cyclical, and in the tech sector. You might consider such to be too high risk. YMMV of course. Take a look at stock screeners as a first step towards evaluating quality companies and work from there with your own due diligence
Great video and very useful tool. The question I have is what is the time frame for valuing the company and it's returns. Or rather over what period of time would you or rather Warren Buffet expect his ROI. Over his life time or over a few months? I know he is a buy and hold value investor so wouldn't his evaluation for his return be over at least 10 years? Your thoughts
#prestonpysh - Your opening stanza under the description of the video shows: Download Preston's 1 page checklist for finding great stock picks: buffettsbooks.com/checklist Isn't it a bit too early for someone to straight away access this PDF? Won't it leave the follower confused, to begin with?
On a profit and loss statement. Technically Net income is before you pay taxes. If you’re investing the net income (before taxes) back into the business its generally tax deductible. As a result you’re reducing your tax liability. If you taking the net income and putting in your pocket then that figure would be subject to taxes.
Well he says she does "everything", so she does the bookkeeping, inventory management, open/close, cleaning, etc... so for $20/hour she runs the entire business herself. Not as good of a deal as just "scooping ice cream".
sorry ... warren buffet way of valuation are normaly not applyable to small business ... it is for stock market only ... small businesses are valueted in a diferent way . 5 times...10 times..20 times earnings ? ... come on men normaly small businesses are sold for 2..3..4 times anual net income depending on risk. who wil invest in a business to break even in 20 years ?? those investments are for rich people only ... instead of having money at a the bank with 1 ou 2% interest .. they apply the money in stock for higher interest rates ... to me..that is not an investment .. you should be able to live from your investment ..what ever it may be ... 5% or 10 % profit is not enough to live from lets say you "invest" 50 million at 10% rate ... a 50 million guy can live one entire year with 5 milion ? .. i do ...but he doesnt
Anyone know what a 14 year old can do to earn money, or build a good foundation for this? I want to get started early, but my parents don't know about this, so I don't have much information on this and I haven't found any info on the internet.
+MillerTurk 1st do a lot of video watching like this one here and any related ones on youtube. Then start making a list of companies you know well personally like disney, mcdonalds, apple, and so on. Later, search the term ticker symbol for each company you find and start looking at how much revenue, net income and debt your favorite ones have. I would do this for some years and if you feel very comfortable have your parents open an account with you as a co-applicant. ONLY buy companies you know about in your everyday life before learning more online.
I don't understand how if you bought it for 100 000 it would pay itself off in 1 year if its only earning 20 000 per year? Wont it take you 5 years to break even? Im obviously missing something here...
Great video! I'm working my way through the lessons and I'm learning a lot of useful information. I have a question about the statement at the very end of the video. "Warren Buffet likes to find company's that trade for 15 less than their earnings." How do I calculate something like that if I'm trying to compare company's and what they are trading for compared to their earnings. Any help would be great
It has been about 3 years since I started learning value investing and this video series was my very first material. 3 years later, I still think this series of videos contain excellent information and is a great place to start, or supplement our studying of value investing theory etc. I can't say I'm a great investor or not on only 3 years of results, but I can say I feel like I somewhat understand what I am doing and continued to add to my knowledge of value investing with various other resources. I can at least know what is a very, very clearly good investment and what is very, very clearly a bad investment. It's a start for sure!
This is simple and easy to understand! I have been investing in stocks and ETFs for almost a year but my friends aren't interested. I think these videos might change their mind!
Well that's how you value a small business ,you gotta find what you're willing to give ,like you would need like 15% or so as a return cause some other risk less bonds or investment are giving so ,so you figure out how much you gotta pay that way
Hi i bought your books, and they are providing me so much information, tx so much! i have a question, i was trying to download the "Download Preston's 1 page checklist" that appear in this video description and the link is dead? tx
This is God's work. I'm currently reading The Intelligent Investor and Poor Charlie's Almanak, these videos are helping me put things into perspective to a great degree; God bless you. My first run through Graham's book had me feeling like I was reading hieroglyphics but it's a lot smoother now. Thanks for this.
I calculated the rent ($10 an hour*24 hours in a day*30 days in a month). This doesn't make sense to me because that $7200 a month rent for a small ice cream shop is crazy.
So you know ice cream shops that are open 24 hours? If you calculate only business hours (which are the only ones where there's US$100 revenue as well), it makes more sense. Anyway, it's just an example.
These video you made are gold!!!!!!! I’ve been looking for something like this for a while.I’m so glad I run across these video. You made it so so so simple. Thanks a life time.
I wanna thank you so much for your videos! Thanks to you I am now able to invest in stocks here in Brazil and not panick at all with " Mr. Market". Thank you!
Valuing the business is a great starting point for determining the timing of the sale. If the approximate selling price is within the seller's acceptable amount, it's time to start the process. Sellers can get maximum profits for the sale of their business if they create a competitive environment when buyers compete against each other for the purchase. The value of the business is ultimately determined by the amount a willing and informed buyer will pay for the business. Creating a competitive environment, causes the buyers to reach deeper into their pockets for fear of loss. The seller will get better terms as well in a competitive environment.
I came back to watch this video again and I can now clearly understand. After doing tons of research, I can actually understand this a lot better. Even tho it was taught well
Hi Presto, I think its okay, since it plays only for a while at the start/end. The only issue was when the music as well as your audio plays at the same time (when u read/explain the objectives) where I could neither enjoy the music nor focus on your voice. You could either keep music and the slides (with bullet points) or you could just the keep voice (audio) and slides. Otherwise the idea of having light music at the start/end is good and pleasing.
Hi Preston, The videos are highly informative and interesting to learn. Appreciate you for sharing this on youtube. These cover everything from basics to the high-end technical or financial stuff. I have one small concern or feedback - I feel the music at the start as well as the background music is loud and distracting.....and its not melodious either. Except for the videos are wonderful.
Hi, I'm also just starting to learn about investing. (I've just finished school). At the end of the vid it says that Mr Buffet likes to find companies that trade for less than 15 times the earnings. I'm just don't understand that part. I would really appreciate it if you could explain that for me! Thanks so much for the videos. (I actually watch them on Mr Buffets web site ;-))
How do we find companies that trade for less than 15x the earnings? What is the formula for all this? From my understanding, we can average the net income of a stock for 5 years, determine what the company is worth (like mentioned in video is a matter of opinion) in this case 15%+ ROI is what company should be worth to me (assuming little risk of course). So if a companies avg. earnings are $100,000 the company is worth roughly $666,666.67, then what do we do with that number? Do we divide it by the volume of shares to calculate what each share should be at? Or is it simply looking at the avg. earnings multiplying by 15, then dividing by volume of shares? I have a feeling I'm over thinking this.
so then Warren likes companies that have a P/E ratio 15 times grater than the actual stock value ? I am curios because I am thinking into getting some KO values, which have a P/E ratio of 44 at the moment, and a stock price of 45.
When you say Mr. Buffet likes companies that trade for less than 15% times the earnings is that the earnings per share? Also, where do you find the earnings on MSN money. Thanks for a great video!!
Hi! Hope you doing good I was hoping that you could help me with something. My question is that how could you define the value of a department? Thanks for the videos they're really helpful
I haven't yet gone into your next lessons yet, so it might be a bit redundant. Just wanted to know on what basis did you make those valuations of 400k, 200k and 100k for the business?
Thank you! very helpful. Question: So what's the reasonable rate to pay for a business? Also, What changes when the owner works in the business? does he get a regular wage?
Hi, I'm interested in finally taking the plunge into investing, and I'm enjoying these videos so far. My dad was always a stock market whiz, and tried to teach the kids and grandkids using a "hot dog stand" example, but we never could get the gist of it. The pictures really help. One question: when you converted the "per hour" model from the small business to the "per year" model for the large business in this example, shouldn't it have been multiplied by 2,000 instead of 1,000? I'm going by the "there are 2,000 work hours in a typical year" presumption I always used when trying to calculate my hourly wage scooping ice cream or shoveling elephant dung into an impressive "yearly salary" for a credit application or parole appeal. :)
+Tenderfoot Prepper This is not about how many work hours a year has and to get from hourly salary to yearly salary. Its a model and fictional numbers to explain how to value a business. :)
