Warren Buffet Case Study Essay
a) From Warren Buffett’s perspective, what is the intrinsic value?
Intrinsic value is succinctly summed up by Warren Buffett as “the present value of future expected performance” (Bruner, Eades, & Schill, 2009). This intrinsic value can encapsulate how well the company is run, its cash flow and places a premium on management competency.
Why is it accorded such importance?
Intrinsic value is considered important in value investing as it allows Buffett to identify stocks or businesses which are undervalued. This is important as “intrinsic value is the value of a company's business, not its stock” (Carbonara, 1999).
How is it estimated?
Buffett readily admits that intrinsic value is highly subjective (Bruner et …show more content…
Miller himself has stated that it may have been 95% luck (Bruner et al., 2009). While Miller’s contrarian strategy allows him to identify promising undervalued or expensive growth shares, he has been lucky they performed above expectations. Hence, Miller’s strategy works to an extent. Contrastingly, studies have suggested you cannot consistently beat the market. As a venture-capital investor said of Miller’s strategy: "worked for a long time, but it's broken" (Lauricella, 2008). Miller had a lot of success taking bets other investors wouldn’t but such favourable outcomes aren’t forever.
c) Consider the mutual fund industry. What roles do portfolio managers play?
The main objective of a portfolio manager is to meet certain goals that their portfolio type requires. Consumers have differing needs and expectations of their investments and the numerous mutual funds reflect that. The portfolio managers then need to choose certain assets to invest in or stocks to purchase to tailor to specific needs.
What are the differences between fundamental and technical securities analysis?
Fundamental analysis relies on economic fundamentals of a company and its industry. This analysis includes economic principles such as supply and demand costs and growth prospects (Bruner et al., 2009). Technical analysis is more concerned on historical data. By