I’m starting to read a series of articles written by Buffett-style fund manager Roger Montgomery of Clime Asset Management (www.clime.com.au)
I’ll probably post some interesting/important takeaways as I read through the articles. Here’s one: Roger Montgomery wrote in one article that his approach is to base valuation estimates on 4 elements:
- Balance sheet equity
- Return the company can sustainably generate from that equity
- The manner in which it retains and distributes its earnings
- A discount rate
This seems very much like the valuation methodology written in Buffettology (by Mary Buffett) but Roger’s method does not use any P/E ratios.
There’s a pretty nice expose on his method at this forum here.