Expert: Paul Henneman - 3/26/2008

Question
I am a value investor.  My level of investment knowledge is MBA finance and Investments graduate. I have reads books such as Scott Hoovers, Stock Valuation, so please DO NOT respond with a bashful explanation in your attempt to explain methodology.  I truly am infatuated with the investment world. I have been searching for a sound valuation strategy that has historical evidence of success. I cannot determine the best strategy for stock valuation. I have tried for the last six years of my life. I attempted, in my graduate studies, to create a sound valuation model, but I have a weak conclusion. Which stock valuation strategy do you suggest and why? I know that is a loaded question, but in a normal stock valuation case, for example the valuation of GE, what method do you use?

Thanks


Answer
Tom,
  Thank you for your question!
First, let me say that stock valuation is not easy, and it comes as no surprise that you have spent a great deal of effort and time on this, and have yet to find something interesting to you. You can ask this question of a hundred people, and get a hundred completely different answers. I would be happy to provide you with what my company has researched and implemented.
   We are a small, highly specialized independent research firm that was founded by two Yale University Professors of finance. With this academic background, perhaps our research would be of more interest to you as our research methodologies are rigorous by any standard in the field of finance.
   The valuation model we use is far to complex for me to outline here in the space I have, but luckily I can point you to a link on our website.  On this page are four academic papers that go into a fair amount of detail on how we approach valuation.  Here is the link:

http://www.valuengine.com/pub/main?p=0

Scroll down to the "ValuEngine Stock Valuation Model" section, and there are links to the four academic papers, written between 1999 and 2004.

Lets start there, I hope that this is helpful. Please do not hesitate to follow up with me if I can answer any questions or be of any further service,

Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com