Valuation

In January 2000, the S&P 500 traded at 32 times trailing earnings.

Worked example: Microsoft — 2013–2019

In November 2006, a private equity consortium paid $44 billion to take Clear Channel Communications private.

Worked example: Anheuser-Busch InBev — 2016

In 1998, Enron reported net income of $703 million.

Worked example: Apple — 2013–2023

In March 2009, Bank of America traded at $3.

Worked example: Berkshire Hathaway — 1965–2023

In January 1972, Blue Chip Stamps proposed paying $25 million for See's Candies, a California chocolate business with $4.

Worked example: Coca-Cola — 1988–2023

Intrinsic value is the discounted value of the cash a business pays out over its life.

Worked example: Coca-Cola — a discounted cash flow walkthrough

A reverse DCF takes the price as given and solves for the growth the market is pricing in.

Worked example: Cisco Systems — 2000

What a business is worth if it never grows again, capitalized at the cost of capital.

Worked example: Colgate-Palmolive — the franchise test

The margin of safety is the gap between the price you pay and the value you estimate.

Worked example: American Express — 1963

Adjust reported earnings to a mid-cycle figure before valuing them.

Worked example: Nucor — valuing a cyclical

Value the business under three coherent cases, not one point estimate.

Worked example: Meta Platforms — 2022

Value each segment with the method and multiple its own economics deserve, then add the pieces.

Worked example: Amazon — AWS inside retail

Intrinsic value compounds at roughly the reinvestment rate times the return on reinvestment.

Worked example: Walmart — runway and saturation