The Concept of Intrinsic Value

(SA, Page 16)

Let us take an example from the field of common stock. In 1922, prior(之前) to the boom in aviation securities, Wright Aeronautical Corporation stock was selling on the New York Stock Exchange at only $8, although(雖然) it was paying a $1 dividend, had some time been earning earning over $2 a share, and showed more than $8 per share in cash assets in the treasury(資產). In this case analysis would readily have established(已確立的) that the intrinsic(內在) value of the issue(股票) was substantially(實質上) above the market price.

Again, consider the same issue in 1928 when it had advance to $280 per share. It was then earning at the rate $8 per share, as against $3.77 in 1927. The dividend rate was $2; the net-asset value was less than $50 per share. A study of this picture must have shown conclusively(確定的) that the market price represented(表示) for the most part the capitalization(資本額) of entirely(全部) conjectural(推測) future prospects----in other words, that the intrinsic value was far less than market quotation.

一只牛﹕

	A		B
	1922	1927	1928
股價	$ 8.00		$ 280
EPS	$ 2.00	$ 3.77	$ 8
Dividend	$ 1.00		$ 2
B	$ 8.00		$ 50
PE	4		35
PB	1		5.6
PExPB	4		196
Yield%	12.5%		0.7%

A﹕intrinsic(內在) value of the issue(股票) was substantially(實質上) above the market price.

B﹕the intrinsic value was far less than market quotation(股價).


從這個例子可以看到﹐Graham沒有說Wright Aeronautical Corporation的價值的數字﹐他沒有說﹐他只是說﹕

• 價值高過市價
• 價值少過市價

市價有數字﹐價值沒有﹐價值是感覺﹐只有經過數據的分析﹐才會有的感覺。


Intrinsic value vs. Price
(SA, Page 17)

From the foregoing(前述的) examples(例子) it will be seen(看來) that the work of securities analyst not without concrete results of considerable(值得考慮的) practical value, and that is applicable(看應用的) to a wide variety(各式各樣) of situations(情況). In all of these instances(實例) he appears(顯露) to be concerned(關於) with the intrinsic value of the security and more particularly(獨特的) with the discovery(發現) of discrepancies(差異) between the intrinsic value and the market price. We must recognize(認清楚), however(無論如何), that intrinsic value is an elusive(難以理解的) concept. In general(普通的) term(詞) it is understood(明白) to be that value which is justified(有正當理由的) by the facts(數據), e.g., the assets, earnings, dividends, definite(肯定的) prospects(前景), as distinct(與它不同的), let us say, from market qoatations(市價) established(被制定) by artificial(人造的) manipulation(操縱) or distorted(歪曲) by psychological excesses(過份行為). But it is a great mistake to imagine(想像) that intrinsic value is as definite(肯定的) and as determinable(可決定的) as is the market price. Some time ago intrinsic value (in the case of common stock) was thought(被認為) to be about the same thing as"book value", i.e., it was equal to the net assets of the business, fairly priced. This view(看法) of intrinsic value was quite(相當) definite(肯定的), but it proved(被證明) almost worthless(無用的) as a practical(實際) matter because neither(即不是) the average earning nor(也不是) the average market price evinced(顯示出) any tendency(傾向) to be governed(支配) by the book value.


從前述的例子來看﹐證券分析家除了分析出有效的價值﹐他的方法也必須能應用在各式各樣的情況。他的舉例除了顯露證券的價值﹐最獨特的是發現價值與價格的差異。我們要認清楚﹐無論如何﹐價值是難以理解的概念。簡單的說﹐價值的背後是數據﹐例如﹐資產﹐盈利﹐股息﹐肯定的前景﹐與它不同的﹐市場的價格是人可以操縱或被瘋狂歪曲。但是﹐認為市價等于價值﹐就大錯特錯了。以前﹐有人認為價值就是帳面值﹐即係企業的淨資產。這看法雖然沒錯﹐但是在事實上已經被證明行不通﹐因為不管是平均盈利﹐還是平均市價﹐沒有任何傾向是受到帳面值影響。


Intrinsic Value and "Earning Power"
(SA, Page 17)

Hence this idea was superseded by a newer view, viz, that the intrinsic value of a business was determined(被確定是) by its earning power. But the phrase(說法) "earning power" must imply(意味著) a fairly(公平) confident(信心) expectation(期待) of certain future results. It is not sufficient(充足) to know what the past earnings have averaged, or even that they disclose(透露) a definite line of growth or decline. They must be plausible(似真似假) grounds for believing that this average or this trend is a dependable(可靠) guide to the future. Experience has shown only too forcibly(有說服力) that in many instances this far from true. This mean that the concept of "earning power", expressed as a definite figure, and the derived(得到) concept of intrinsic value, as something equally definite and ascertainable, cannot be safely accepted as a general premise(假設) of security analysis.

之前已經說明價值不是帳面值﹐後來又有人說價值就是盈利能力。“盈利能力”一詞表示對未來業績的預測﹐而這預測有充份的數據支持。以前的平均盈利是不足以推算未來的盈利﹐也不能正確透露未來盈利的升跌。盈利的趨勢似真似假﹐對未來的推測是不可靠的。很多可靠的經驗和例子已經證明平均盈利和盈利的趨勢是不管用。以“盈利能力”的概念﹐計算出有數據支持的數字﹐來得到價值的概念﹐是一種可以也不可以﹐這種假設不能被證券分析接受。

Example :
To make this reasoning clearer, let us consider a concrete and typical(有代表性) example. What would we mean by the intrinsic value of J.I.Case Company common, as analyzed, say, early in 1933? The market price as $30; the asset value per share was $176; no dividend was being paid; the average earnings for ten years had been $9.50 per share; the results for 1932 had shown a deficit(虧損) of $17 per share. If we followed a customary(按慣例) method of appraisal(評估), we might take the average earnings per share of common for ten years, multiply this average by ten, and arrive at an intrinsic value of $95. But let us examine(檢查) the individual figures which make up this ten year average. They are as follow:

1932	$(17.40)
1931	$(2.90)
1930	$ 11.00
1929	$ 20.40
1928	$ 26.90
1927	$ 26.00
1926	$ 23.30
1925	$ 15.30
1924	$ (5.90)
1923	$ (2.10)
平均	$ 9.50

補充﹕
-1933年的市價=$30
-帳面值=$176
-沒有股息


This average of $9.50 is obviously(明顯) nothing more than an arithmetical(算術) resultant from ten unrelated figures. It can hardly be urged(極力主張) that this average is in any way representative of typical conditions in the past or representative of what may be expected in the future. Hence any figure of "real" or intrinsic value derived from this average must be characterized(描繪) as equally accidental or artificial.



以上是J.I.Case Company的10年盈利紀錄﹐那麼它1933年的價值是多少﹖
按照一般的算法﹐以10年平均盈利﹐乘以10倍﹐算到的價值是$95。

$9.50只是從10個無關聯數字計算出來的平均數字。很難說這數字代表了過去或預測未來。因此﹐任何從這個平均數字聯想到的價值﹐只是意外或者捏造出來的。


The Role of Intrinsic Value in the Work of Analyst
(SA, Page 18)

Let us try to formulate(用公式表示) a statement(報告) of the role(角色) of intrinsic value in the work of analyst which will reconcile(調解) the rather(而不是) conflicting(衝突) implications(涉及) of our various examples. The essential(要點) point is that securities analysis does not seek(尋找) to determine exactly what is the intrinsic value of a given security. It needs only to establish either that the value is adequate(足夠的), e.g., to protect a bond or to justify(證明) a stock purchase, or else that the value is considerably higher or considerably lower than the market price. For such purposes an indefinite(模糊的) and approximate(接近的) measure of the intrinsic value may be sufficient(足夠). To use a homely simile, it is quite possible to decide by inspection that a women enough to vote without knowing her age, or that a man is heavier than he should be without knowing his exact weight.

重點並非得到證券正確的價值。而是要證實的價值是否“足夠”﹐例如﹕
1) 債券有足夠的保障﹐股票有足夠買入的理由
2) 價值高于市價或低過市價(價值/價格的距離)

對于以上的目的﹐模糊或接近的價值數字已經是足夠的了。
估計女人的歲數並不需要知道她的正確年齡﹐是否是胖子也不需要知道他的正確重量。


Example No.1:
In 1928 the public was offered a large issue of 6% noncumulative preferred stock of St. Louis-San Francisco Railway Company priced at $100. The record showed that in no year in the company's history earnings been equivalent to as much as 1.5 times the fixed charges and preffered dividends combined.

Graham comment:
The rejection of St. Louis-San Francisco Preferred did not require an exact calculation of the intrinsic value of this railroad system. It was enough to show, very simply from earning record, that the margin of value above the bondholders' and preferred stockholders' claims was too small to assure safety.

我們不需要正確知道St. Louis-San Francisco的鐵路系統的商業價值﹐就已經可以拒絕買入它的優先股。因為從它的盈利紀錄就已經充足的知道﹐不管是對債權人還是優先股股東的權益保障﹐顯然是太小了。

Example No.2:
In June 1932 it was possible to purchase 5% bonds of Owens-Illinois Glass Company, due 1939,
a) at 70, yielding 11% to maturity.
b) The company earnings were many times the interest requirements--not only on the average but even at that time of severe depression.
c) The bond issue was amply covered by current asset alone, and was followed by common and preferred stock with a very large aggregate market value, taking their lowest quotations.

Graham comment:
In this instance, also, it would undoubtedly have been difficult to arrive at a fair valuation of the business; but it was quite easy to decide that this value in any event was far in excess of the company's debt.

和以上例子相同﹐雖然同樣是很難計算Owens-Illinois Glass Company的商業價值﹔不過﹐不管在什麼情況都能容易的知道它的價值是遠高于它的價格。

Example No.3:
In the Wright Aeronautical example

Graham comment:
the earlier situation presented a set of facts which demonstrated that the business was worth substantially more than $8 per share. In the later year, the facts were equally conclusive that the business did not have a reasonable value of $280 per share. It would have been difficult for the analyst to determine whether Wright Aeronautical was actually worth $20 or $40 a share in 1922--or actually worth $50 or $80 in 1929. But fortunately it was not necessary to decide these point in order to conclude that the shares were attractive were attractive at $8 and unattractive, intrinsically, at $280.

很難評估Wright Aeronautical1992年的價值是$20還是$40﹐或1929年是$50還是$80。很幸運的是不需要知道﹐就已經能了解當股價是$8是便宜﹐當$280的時候是不便宜。

Example No.4:
In the J.I. Case Company example

Graham comment:
The J.I. Case example illustrates the far more typical common-stock situation, in which the analyst cannot reach a dependable conclusive as to the relation of intrinsic value to market price. But even here, if the price had been low or high enough, a conclusion might have been warranted. To express the uncertainty of the picture, we might say that it was difficult to determine in early 1933 whether the intrinsic value of Case common was nearer $30 or $130. Yet if the stock had been selling at as low as $10, the analyst would undoubtedly have been justified in declaring that it was worth more than the market price.

J.I. Case Company是我們最常見到的例子﹐也就是我們無法知道它的可靠價值-價格的距離。雖然如此﹐只要股價偏低或偏高﹐我們還是可以做出結論。由于前景不明朗﹐我們可能無法估計1933年初它的價值是$30還是$130。但是只要股價偏低﹐例如$10﹐我們就可以認為價值是高于價格。


Flexibility of the Concept of Intrinsic Value
(SA﹐ Page 67)*

Our notion(概念) of the intrinsic value may be more or less distinct(與其他不同), depending on the particular(個別) case. The degree(程度) of indistinctness(不了解) may be expressed by a very hypothetical(假設的) "range of approximate(大慨的) value", which would grow wider as the uncertainty(不確定的)) of the picture increased, e.g., $20 to $40 for Wright Aeronautical in 1922 as against $30 to $130 for Case(J.I. Case Company) in 1933. It would follow that even a very indefinite idea of the intrinsic value may still justify a conclusion if the current price falls far outside either the maximum or minimum appraisal(評估).


*SA Sixth edition