Okay guys im sure lot of yall are confused.I will summarise the complicated sections of this video. Firstly how does he calculate the market value? Basically he takes the net revenue as a dividend paid to the owner, he then checks how much the net revenue will be after 10 years.Net revenue grows at a rate of 25% for sees candies. therefore 2*1.25^10=18.626 million. Now this value is discounted to the present using a discount rate of 11.1% you can find this value using the intrinsic value calculator. It gives 6.5 million. This 6.5 million is then added to the net tangible assets which is 8 million.This gives us 14.5 million. Preston rounds this value to 15 million to simplify his explanation. What effect does economic good will have during inflation? Now again even though Preston doesn't show us, sees candies has a a large value in intangible assets(economic goodwill),while boring company has no economic good will. This can be deduced by the fact that sees candies produces the same earnings as bsc using less tangible assets, this means sees candies must be having more in intangible assets to be producing such net revenue . Now when inflation occurs at a 100% the situation is complex (its very hard to explain)so i will simply tell you what happens. Companies with a high goodwill will show an increase in nominal value due to inflation,while companies with low to no goodwill will show little to no increase in market value due to INFLATION. If anyone has any questions feel free to drop a reply, i will answer your question.

Ever since my first accounting class I've never been comfortable with "goodwill". The potential for abuse by one company overpaying for another is a concern.

I suffer through the repeating and boring Ads because I love this series so much! Thank's for the amazing content!

Very many thanks. I watched your videos as often as possible. You have done a great job. Thanks.

Im amazed at the quality of your course. It has really helped me understand investing. Thank you

Your videos, especially this one, is so good that I don't know what to say. really clarifies important things and how buffet saw it. Really good knowledge packed and visualized here. Some videos more basic but some like these really gives a good understanding about "good goodwill". Thanks a million guys and all my best to you! By the way, do you have any take on a company that has more goodwill than equity? This company has 100m EQ and 200m goodwill... So it is negative.. really good return on NTA but still. They just merged a company for 100m.

Amazing lessons, thank you for these videos

Oh I think i get it now. What you are saying is, when comparing 2 companies with similar total assets, the company with more economic goodwill will fare better when there is (high) inflation? And by extension, companies with a relatively higher proportion of economic goodwill in their total assets is less susceptible to the negative effects of inflation?

Thank you so much Preston

Hi Preston! Great video there. Could you just explain to me the logic for subtracting the par value of preferred stock from the equity to arrive at the actual book value of the company ?

Do you mean that both companies have the same total assets and since See's had less tangible assets it would have more intangible assets and hence more economic goodwill compared with Boring Square?

Knowledge worth of gold!

Also btw RONTA is an important figure to consider when you predict there will be high inflation. This is usually for longterm investments.We consider RONTA for inflationary periods because NTA are not inflation proof.

Ben Graham and Warren Buffet remind me of the philosophers Schopenhauer and Nietzsche. Schopenhauer was the great pessimist who came to the conclusion that life was suffering and not a barrel of laughs by default, Similar to Graham who always took the pessimist route to his investment strategy. Nietzsche worked off Schopenhauer to say that yes life was suffering and not a barrel of laughs but if you had faith in your ability to overcome and grow then you would reap the rewards. Reminds me of Buffet. Be conservative and sensible with risk assessment but look for the potential of growth rather than just the safety :D

Hey Preston, First of all, thank you for all your help, I'm learning a ton from your videos! My question here is about the market value of 15 Million and 29 Million for See's. I am confused as to how you are coming to those numbers? Thanks, Scott

Hey Preston I know you may get this question all the time but do you explain this type of valuation in your book on amazon

How did you calculate the 29 million and 36 million market value again? Can anyone tell me how the calculation wad done using the interest rate?

Thank you Preston for making this rocket science so easy... I am studying your videos before i start investing.

how did you calculate the market value for those 2 companies? I am confused a bit

HI, you mentioned a balance of goodwill to tangible assets for a company that has minimal debt and good earnings, but what is considered balanced ?? is there ratio??

Hi Preston, i understand the balancing of the two, but wouldn't good will reflected on the earning power?

Keep it up! Would love more videos on this

I think this one is the most confusing so far. I didn’t understand how the market values were determined. Also, how the economic good will were calculated. Please show the calculations step by step. Thank you!

what does it mean if i get a negative number on NTA?

is net tangible asset the same as net asset value?

Hi Preston Pysh, i am a totally newbie to economic and stocks but i do watched all your series and videos. I am just wondering where does the "additional 6 million dollars" come from? And why See's is being charged a 11.1% interest rate while Boring Square was not? Thank you so much.

So is it better to look for a company with a lower NTA to Net Income Ratio? Or can you not apply that directly? I originally assumed you wanted to larger NTA since that is the value of the company if it were to disappear tomorrow.

Thank you very much! 😑🙏🏼

What is discounting interest rates mean i.e. 11.1 % u mentioned , i didnt get it, help from anyone is appreciated. Thanks for great content.

at 20:16 mark of the video, where does the number "resulted in 6M additional dollars" come from in See's case?

Hi Preston, Thank you for all this excellent, high quality material you are sharing. I have build up my confidence to start investing in stocks because of your videos. I saw your lesson on stock screeners and I got everything i needed to start selecting the stocks i am interested in. I am currently stuck at choosing the stock broker. I am leaning towards Scotttrade as i am planning to buy and hold as long term investments and i understand they don't have annual maintenance nor inactivity fees. But i am still compiling other info i need to consider for choosing the right broker. Do you have any suggestions or any additional info i might need to consider? Which broker are you preferring or using? I highly value your opinion. Thanks Again. And please keep sharing more.

Second, when there is a 100% inflation, why would See's and Boring Square have to invest another 8M and 18M respectively to double their net income? When there is a 100% inflation wouldn't the earnings double by itself since what they sell now costs twice as much and their NTA double as well since their tangible assets now costs twice as much?

Hi, if I got it right, basically you just used the intrinsic value calculator on the BuffetsBooks.com. I saw in the one of replies that you used the earning as dividend, the NTA as book value, 0% growth in book value and discount rate at 11.1%. It confuses me because I think the book value is actually the equity per share, which should be different from the NTA per share. Confusion1: do we know the share outstanding? Confusion2: how can you use NTA as the book value if the numbers are different? The market value will make sense if there is only one share for both the companies. Many thanks.

inflation proof and economic strength of the company =goodwill

so, does buffet look at ROE or RONTA? what is more important?

Ive watched all of your videos and haven't been able to put an actual 10 year review into practice. It seems that finding the last 3 years or even 5 years of a stocks financials is pretty much all I can access without coughing up some $$. Can you please direct me on where I can access the financials for a stock over the last 10 years either for free or from a site that is well composed with easy to find information that's not too pricey?

For confusing viewers, pls read the oldest 10 - 20 comments for further clarification. Especially simplicated comments with Preston.

I wonder if you can measure a company's economic goodwill with RONTA?

Whats Warren Buffett thinks how mutch is goodwill need to company ?

See's and Boring Square Company example, you could remove the goodwill from the story and would have the same result. Hard to get how goodwill is influencing all this.

Not sure of the calc to See's market worth to $15M. I've tried every combination of 11.1% versus the 25%, and I cant from 8M to 15M. Please help!

how did you get market value of $15million?

@Preston sir , plz reply

I just cant FOCUS

this based on assumption no impairment on the goodwill

MSN money made tons of changes. Any recommendations for other websites, I find zacks is good but I can’t find foreign stocks Europe, Canada and Asia

Thanks for the great videos, but it's pretty frustrating that you don't have a playlist of all your videos in proper sequential order...

There's 2 things I don't get from your explanation on the proof of that economic goodwill is inflation proof. First, I don't see how your calculations show that economic goodwill is inflation proof. All you did was state that See's candies had economic goodwill. I could have just as easily stated that See's candies also didn't have economic goodwill and the calculations would still be identical, since you only used numbers for tangible assets.

The videos are very good, but they never explain how to get the real interest numbers, DCF, Intrinsec Value, Market Value...

Is this right? $2,000,000 (dividend per year) * 10 years = $20,000,000 PV = FV * (1 + (i/m))^(-n * m) PV = $20,000,000 * (1 + ( .111/4))^(-10 * 4) PV = $6,691,609.32 Since book value didn’t grow it remained $8,000,000. Market Value = $6,691,609.32 + $8,000,000 Market Value = $14,691,609.32

I have the same question as StasB101 but i'll be more specific: in your video at the 16:50minute mark, you calculated RONTA for See's and BSC, which we could follow. I also understand the assumption of 11.1% interest rates. But how did you suddenly arrive at See's market value to be $15m. We can't figure it out since we don't know what the shares o/standing is in this hypothetical scenario?

Will this work in all the country

11:11

18:35 I don't understand why you need to double the assets to produce a doubling in net income due to 100% increase in inflation. If you have 100% inflation you would raise prices by 100% and cover expense that would have risen by 100% leaving your net income unchanged.

this is lesson makes me dizzy mannnnnnnnnn

I dont get this video.

Wtf is goodwill

Today nike results poorly performed❤❤🎉🎉

The explanation is unclear without providing the math behind it. One of my least favorite videos of the series.