Model Vs. Market

Last month we posted a list of non-financial Dow 30 components with their target prices compared to the market prices. We classified the companies into 3 groups: undervalued (green arrows), fairly valued (yellow arrows), and overvalued (red arrows). The target prices were determined with the discounted cash flow valuation model in Excel. Here is how the 3 groups have performed since our post. Undervalued (green arrows): 18% avg. return Fairly valued (yellow arrows): 6% avg. return Overvalued (red arrows):...

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"I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy." - Peter Lynch In today's Model Vs. Market post we're looking at Intel. Intel's products can be found in many of your favorite devices and the company has shown to be a consistent performer in a volatile market. The company generates attractive free cash flow and is debt-free if you account for its cash and short-term investments. Company...

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“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” ― Benjamin Graham In today's Model Vs. Market post we are going to look at the valuations of each industrial component of the Dow 30. The following table is a result of valuing each industrial company in the Dow 30 using a 10% cost of capital. The table is sorted in descending order with the most undervalued companies...

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“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett In today's Model Vs. Market post we're looking at Home Depot. Home Depot has experienced an impressive run over the last 5 years, with shares up almost 400% over that time period. Home Depot is a wonderful company but it is far from trading in the clearance aisle. It is a leader in its market and has impressive profit...

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In today's Model Vs. Market post we're looking at Wal-Mart Stores. Wal-Mart has transitioned into a low-growth company that is now increasingly competing with online retailers such as Amazon and warehouse clubs such as Costco. As a result, the stock is trading near its 52-week low. Company Profile Wal-Mart Stores, Inc. is engaged in the operation of retail, wholesale and other store units in various formats around the world. Its range of products span apparel, footwear, accessories, home decor, kitcehn, garden,...

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In today's Model Vs. Market post we're looking at McDonald's Corporation. McDonald's has struggled to grow as competitors such as Chipotle and other "fast casual" competitors have captured market share with healthier menus and premium products. Company Profile McDonald’s Corporation is engaged in the global operation of McDonald’s restaurants and its franchises. Its menu spans breakfast, desserts and full meals (ala carte, combo) and includes hamburgers (Big Mac, Quarter Pounder with Cheese), Chicken McNuggets, chicken sandwiches, wraps, French fries, salads,...

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"You know, people tend to like to buy companies that are doing well." - Walter Schloss In today's Model Vs. Market post we're looking at Verizon Communications. Verizon and other media companies have been under pressure due to "cable cutters" and that may be creating a buying opportunity. Here is the company's profile: Verizon Communications Inc. is a holding company engaged in providing communication, information and entertainment products and services geared for consumers, businesses and government agencies. The firm's business is...

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"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett In this week's Model Vs. Market we're looking at Sherwin-Williams Company. Here is some background on the company: Sherwin-Williams Company is engaged in the development, manufacture and distribution of paint, coatings and related products for use in a variety of commercial and industrial activities. Its business is divided into four segments: Paint Stores Group (architectural paint and coatings),...

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"The value of any stock, bond or business today is determined by the cash inflows and outflows – discounted at an appropriate interest rate – that can be expected to occur during the remaining life of the asset." - Warren Buffett In this week's Model Vs. Market we're looking at Apple. Here is some background on the company: Apple Inc. is engaged in the design, manufacture and distribution of consumer electronics products (iPhone, iPod, iPad and Mac), computer operating systems (iOS...

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This week in Model Vs. Market we're taking a look at International Business Machines (IBM) to compare the company's intrinsic value, as calculated by our discounted cash flow model, with the company's current share price. "The value of any stock, bond or business today is determined by the cash inflows and outflows – discounted at an appropriate interest rate – that can be expected to occur during the remaining life of the asset." - Warren Buffett If a company's current...

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