WARREN BUFFETT

Decision Making Area 3:Investment Decisions * Table of Articles * Summary of Articles * Observations * Conclusion

These decisions may include selling and buying of stocks, bonds, futures, currencies and so on. Stocktrak.com helps to implement the investment decision process as it includes evaluation tools for securities being traded at stock market. The website provides graphical historical performance of stock prices and this graphical performance can be analyzed for making different investment decisions related to those stocks. This project will be investing the given specified amount in a portfolio. The portfolio investment will help to reduce the level of risk associated with investment. With the reduction in level of risk, the average return of portfolio investment will increase as compare to individual investments. Thus, portfolio investment is better option for investment as compare to individual

Literally, intrinsic worth means some inherent qualities that every human naturally possesses; however, to Kant intrinsic concept indicates worth with ends, which is contrary to instrumental worth. Its intrinsic value is subjective, which does not have relative value with regards to place and situation. Therefore, it has intrinsic in itself at everywhere and to any human being according to Kant. A worth from the seller perspective has invaluable worth, however, the intrinsic worth is from the perspective of subjective (owner), therefore, the worth of dignity has invaluable worth due to its subjective (demand of) value. Therefore, instead of relative price from customer perspective, it has its own infinite value. Simply due to human being who deserved dignity, has an intrinsic worth. Similar formulation as done by Bernstein seems converge with Kant’s worth to an individual is 'for its own sake. (Bernstein, 2001). Kant’s claim on the concept of dignity is rather secular; therefore,

A firm’s intrinsic value refers to the true worth of stock in that firm which is calculated on return data and accurate risks. On the other hand, a firm’s current stock price talks about its market price as a whole as perceived by an

Several internal factors can influence the valuation of a company, however, in the subsequent are some factors that will assist management in protecting its shareholders. The first reason is the desire to generate profits for the company, as a profitable firm will attract investors. Secondly, the need to improve the management of a company can lead to valuation as the information can be used to spur growth. Valuation will assist in understanding some of the factors affecting the value of the company such as client relationships, financials, image, technology employees, and marketing. Proper management is implemented after identifying the issues affecting the organization’s value. Thirdly, communicating to the public accurate and current information is essential in attracting investors and maintaining transparency, which builds the company image.

It is important to know the proper technique and method of valuing a company because different people may have different ways of assessing the value; it is also important in understanding the bank’s method of appraising and valuing a company or business

Miller is an adherent of fundamental analysis, an approach to equity investing he had gleaned from a number of sources. Miller’s approach was research-intensive and highly concentrated. Nearly 50% of Value Trust’s assets were invested in just 10 large-capitalization companies. While most of Miller’s investments were value stocks, he was not averse to taking large positions in the stocks of growth companies. Overall, Miller’s style was eclectic and difficult to distill.

To place a permanent definition on intrinsic values is extremely hard to accomplish due to the many endless amounts of opinions that occur throughout the world. Due to the many perspective that occur throughout the world, it is very difficult to determine the most common definitions because almost every definition is different. In many people's eyes, they believe the true definition belongs to the eyes of the beholder. Although these ideas for the definition aren't incorrect, they don't accurately display the true meaning of intrinsic values. The true definition for intrinsic value is the emotional or cultural value that a location, object, or item possess to someone, and this value cannot be quantified, unless by the person who has this attachment.

Valuation is the estimation of an asset’s value, whether real or financial, based on variables perceived to be related to future investment returns, on comparison with similar assets, or, when relevant, on estimates of immediate liquidation proceeds (Pinto, Henry, Robinson, Stowe; 2010).

Intrinsic value refers to the value of a company, stock, currency or product determined through fundamental analysis without reference to its market value. It is ordinarily calculated by summing the discounted future income generated by the asset to obtain the present value. In this case, Facebook’s intrinsic value is its estimate value/share from Discounted Cash Flow analysis.

Value investing is a way of investing in company stocks that are considered either undervalued or out-of-favor by the market. In other word, a value investment is one where the intrinsic value of the stock is not accurately reflected in the current market valuation. The underlying reason of too much decreasing in the stock price is that the company may be losing market shares or even in trouble due to market’s panic attributed to negative rumors as well as having management problems. Since the market price

The historical roots on Return on Investments (ROI) have an extensive historical background which involves the Du Pont system. It is significant to illustrate the major history behind the Return on Investments (ROI) and how the Du Pont system started. The purpose of the Return on Investment (ROI) is to evaluate the efficiency of an investment or compare the efficiency of various investments. In addition to (ROI) share the common class of profitability ratios. Several examples will show how Return on Investments (ROI) and the Du Pont system has established life-long formulas to help indicate growth or decline on financial investments.

It is importance because it can be measure the ability to earn returns in excess of the cost of capital, rather than the accounting profit, which can know the attractiveness of a business. Furthermore, the gain in intrinsic value could be modeled as the value added by a business above and beyond the charge for the use of capital in that business. On the other hand, the alternatives to intrinsic value are accounting profit, performance, firm size, etc. But, Buffett reject accounting profit as a measurement mainly because the accounting reality was conservative, backward looking, governed by GAAP, ignore the market value of a business and the performance of a business, also ignore the intangible assets for a business such as patents, trademarks, expertise, reputation, etc. He believed that investment decision should be based on economy reality, which included many items that accounting profit had ignored.

It is expressed in time or years. It is normally defined as the period, usually expressed in years, which it takes the cash inflows from an investment project to equal the cast outflows.

An investment also known as a security is a pledge of money from an individual, government, or cooperation that is expected to accrue additional wealth on top of its original dollar amount. An investment can be a long-term or short-term obligation depending on the investor’s goals and/or assets they choose to invest in. The investment decision process is a two-step process which is necessary to make a sound trustable and efficient investment. The first step involves an evaluation of the investment you as the investor are interested in committing money towards, including characteristics of the security (i.e. how it acts in the current market, how the current/future market may react to this investment and possible returns on your investment). Finally, the management of your investment portfolio, including how often it should be revised, how the performance of your securities should be measured (how often they should be measured), and other important aspects of your current investments. Investing revolves around one basic concept, improving our future, investors invest money today to improve their welfare in the future which is why understanding what an investment is and the process of decision making before investing is extremely important.