Would you like me to value your stocks?

Having read Roger Montgomery's book Value.able I have created an online spreadsheet using his formula to value shares. If interested to have a look at the spreadsheet then feel free to follow the link from my earlier November post 'Which of these stocks is currently attractive?'

Alternatively if you have any shares which you want me to value using their 2011 annual report then please feel free to let me know via a reply below.

With the current state of global economy such as European sovereign debt crisis and rehypothecation, I believe shares will continue to become even more attractive in coming months.

For example, JB Hi-Fi (ASX:JBH) is currently trading at $11.34 (28/12/11) after a surprise downgrade of their profit forecast for 2012. Could this be the chance to buy that value investors have been waiting for? I've updated my online calculator to include an estimated 10% drop in profit for JBH: https://docs.google.com/spreadsheet/ccc?key=0AoGU3QVjAi2tdEZxTVBEZzc3bUtxa0RCaWJnTDBTcVE#gid=7

Value investors around the world would currently be on high alert for opportunities. For example, Orbis Investment Management (Australia) has recently announced they are now a significant shareholder of Matrix Composites and Engineering (ASX:MCE) with a 5.48% share.

Those unfamiliar with Orbis will find this Forbes article an interesting read. The article explains their contrarian, Buffett-style value investing principles: http://www.forbes.com/global/2001/0820/036.html

The basic valuation formula is: ROE / ROR x Equity per share.

ROE = Return on equity
ROR = Required rate of return

However Roger improves on the basic formula by breaking the first part of the equation (ROE/ROR) into two parts: 1. Profit retained 2. Profit paid out as dividend.

By doing this the dividend payout ratio of the company is taken into account. Basically if you had a company with high sustainable ROE you would benefit from retaining the profit so it can grow to an even larger amount than paying it out in dividends.

For individual stock requests I'll discuss the further assumptions used in the formula and also the variables such as required rate of return.

Again, I'm also on the look out for good value shares at the moment and willing to value them if you want to let me know a stock you are interested in! 


Cheers
Sterling