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00:00:00 – 00:14:10
The video discusses the concept of intrinsic value in relation to Alibaba's recent developments and financial analysis. Key points include calculating intrinsic value using discounted cash flow methods, consideration of growth rates and discount rates, analyzing future cash flows and excess cash, and evaluating the company's market cap compared to intrinsic value to identify potential investment opportunities. The speaker emphasizes the importance of a margin of safety in investments and mentions renowned investors like Michael Berry and Michael Burry as influences in understanding investment strategies. Overall, the video presents Alibaba as a high-quality business with potential investment value, offering insights on valuation techniques and investment perspectives for viewers.
00:00:00
In this segment of the video, the speaker discusses Michael Berry’s recent purchase of Alibaba and the calculation of the intrinsic value of the company. They explain that intrinsic value is the value of all future cash flows discounted back to the present. The discounted cash flow method is used for valuation, and growth rates for the past and future years of Alibaba are examined. The video provides a template for calculating the intrinsic value, and viewers are encouraged to check out a full video on intrinsic value for further understanding. Additionally, a shoutout is given to Investing with Tom for inspiring the video content.
00:03:00
In this segment of the video, the speaker discusses the growth rate for Alibaba over the next 10 years, estimating a low percentage increase of 0.47 per year. They also highlight the importance of the discount rate in determining intrinsic value and achieving a margin of safety in investments. The speaker explains the method of investing based on future cash flows discounted at an appropriate rate, focusing on business quality and using a multiple of 10 to 15 for evaluating intrinsic value. They emphasize Alibaba as a high-quality business with a business quality multiple of 15. The speaker mentions checking Alibaba’s free cash flow from sources like Macro Trends to calculate intrinsic value.
00:06:00
In this segment of the video, the presenter discusses Alibaba’s financial situation, mentioning that in 2022, the company generated 22.5 billion in free cash flow due to a significant fine imposed by the Chinese government. The video outlines the importance of future cash flows for determining intrinsic value, including adding excess cash on the balance sheet to the valuation. The presenter also highlights the need to convert the cash amount from Chinese yen to US dollars for accurate valuation, utilizing a currency converter tool.
00:09:00
In this part of the video, the speaker discusses the calculation of Alibaba’s intrinsic value using the discounted cash flow method. They project future free cash flows, discount them back to the present using a 10% discount rate, and add in excess cash to arrive at an intrinsic value of 349 billion. As value investors, they consider different discount margins (50%, 30%, 20%) off the intrinsic value to determine a reasonable purchase price. Finally, they compare this intrinsic value to the current market cap of 279.33 billion to analyze the price-value discrepancy.
00:12:00
In this segment of the video, the speaker discusses analyzing Alibaba’s intrinsic value, which they estimate to be $349 billion compared to its current market cap of $279 billion, indicating a potential 20% margin of safety. They consider factors such as projected free cash flows, expected growth, discount rate, business quality multiple, and access cash in their assessment. The speaker sees this as a possibly attractive investment opportunity, although a 20% margin of safety is considered decent but not ideal. They briefly mention investor Michael Burry’s investment style and emphasize the importance of understanding how investors think and make decisions. Viewers are encouraged to like, subscribe, and check out more content on investing with Tom.