How Do You All Make Revenue Forcasts?

[BadBoyBenny]

Adios,

Typically management will publish their own forecasts you can use that information, combined with their past history of meeting, exceeding, or not meeting their forecasts as a guide. Berkshire is a tough example because it is so diverse and complex in it's sum that it would be damn near impossible to do it by looking at individual businesses. I doubt Buffet gives revenue forecasts anyway, his targets would probably deal with equity value or retained earings, not revenue. not only will this type of estimate be provded, but the 10-k will often list specific risks that mangement thinks could impact their ability to meet their estimates. Each person reading the 10-k could discount these risks differently.

Also, market pessimism may not necessarily be related to next years revenue, but instead people could mean that the market as a whole is too optimistic/pessimistic about long term trends, or extraordinary items like potential litigation.

As far as whether an individual security is undervalued, it may be that the person making the statement agrees with the market on revenue and cash flow estimates, but believes the compan yshould be worth a higher ratio to these amounts than they are.

Disclaimer -- I have no idea whether I would personally consider the stocks provided as undervalued or overvalued.

[adios]

Hi Benny,

Ok I understand your points is that a stock may be undervalued because the risks inherent in producing "earnings" are not as great as the market perceives them to be. For me a lot of companys have fairly straightforward business models but I don't have the wherewithall to predict unexpected economic growth (either negative or positive) generally speaking.

[BadBoyBenny]

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For me a lot of companys have fairly straightforward business models but I don't have the wherewithall to predict unexpected economic growth (either negative or positive) generally speaking.

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Nothing wrong with that. Some people think they do, and some don't it requires a certain amount of arrogance to think you can outsmart the market.

I think with large companies like the ones you listed, any decision to buy the individual security over some index or bucket of stocks in the sector, should usually be based on a really long term bet on their management\business model\strategy. Any short term bet would most likely be based on a specific major product that you believe in, or a percieved overreaction to some negative news.

FWIW I haven't bought a share in any company worth over a billion in market cap since I was a naive 21 year old. Now that I am a naive 26 year old, I feel that I can sometimes find inefficiencies in smaller securities that are watched and analyzed by less people. And my retirement money is mostly in indexes, any money I make in individual stocks will be retire really young money.

[buffett]

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it requires a certain amount of arrogance to think you can outsmart the market

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