Buy and Hold Valuation Question/Discussion

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i) There is no need to come up with precise intrinsic value figures... think valuation instead in more probabilistic terms of whether it is possible to achieve desired IRR in light of current available facts .

Hi hmwes,

IMO, in general, metrics used by value investors do not result in either a precise value, nor do any of the individual metric result in an intrinsic value for the company. Thus, the same would apply to DCF, which is that it is merely one of the many metrics which are prone to large amount of errors, hence requiring even larger amount of allowances. Thus, I would agree with your point above, that intrinsic value estimation is probabilistic in nature. However, I believe what matters in value investing is that we buy far below the intrinsic value, and not whether we know the intrinsic value, and thus the emphasis should be on the margin of safety. This means that it would be usually be good enough to determine that a certain stock is 'at least worth $10', versus 'worth around 20 dollars'.