Valuations

30 Intrinsic Value Estimations

in the style of

Warren Buffett and Charlie Munger

By Bud Labitan

ABRIDGED VERSION CHAPTERS 1=3 / 30

Copyright © 2010

All rights reserved.

Printed in the United States of America.

No part of this book may be used or reproduced

in any manner without permission.

ISBN 978-0-557-48333-4

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2
 TABLE OF CONTENTS

INTRODUCTION

Chapter 1 : AAPL, An estimated valuation of Apple Inc. 5/6/2010

Chapter 2 : ABC, AmerisourceBergen Corp 5/11/2010

Chapter 3 : APOL, Apollo Group Inc. 5/5/2010

…end of abridged version

Chapter 4 : BDX, Becton Dickinson & Co. 5/8/2010

Chapter 5 : BUD, Anheuser Busch Inbev ADR 5/11/2010

Chapter 6 : CMCSA, Comcast Corp. 5/6/2010

Chapter 7 : CSCO, Systems Inc. 5/6/2010

Chapter 8 : CX, of Cemex ADR 5/6/2010

Chapter 9 : DIS, Walt Disney Co. 5/11/2010

Chapter 10 : DOW, Dow Chemical. 5/9/2010

Chapter 11 : EBAY, eBay Inc. 5/9/2010

Chapter 12 : FO, Fortune Brands Inc. 5/13/2010

Chapter 13 : GCI, Gannett Co Inc. 5/6/2010

Chapter 14 : GD, General Dynamics Corp. 5/12/2010

Chapter 15 : GE, General Electric Co. 5/7/2010

Chapter 16 : HD, Home Depot Inc. 5/12/2010

Chapter 17 : INTC, Intel Corp. 5/6/2010

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Chapter 18 : IRM, Iron Mountain Inc. 5/6/2010

Chapter 19 : JEC, Jacobs Engineering Group Inc. 5/6/2010

Chapter 20 : JNJ, Johnson & Johnson 5/6/2010

Chapter 21 : KO, Coca-Cola Co. 5/9/2010

Chapter 22 : LOW, Lowe's Companies Inc. 5/12/2010

Chapter 23 : MCK, McKesson Corp. 5/10/2010

Chapter 24 : MMM, 3M Co. 5/9/2010

Chapter 25 : MSFT, Microsoft 5/6/2010

Chapter 26 : PEP, Pepsico Inc. 5/9/2010

Chapter 27 : PG, Procter & Gamble Co. 5/9/2010

Chapter 28 : TAP, Molson Coors Brewing Co. 5/9/2010

Chapter 29 : UNH, UnitedHealth Group Inc. 5/4/2010

Chapter 30 : YUM, YUM! BRANDS INC. 5/11/2010

APPENDIX

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 ACKNOWLEDGMENTS

This book is dedicated to my mother Rae Mikels Labitan. I am also grateful to

my family and friends for their support in the writing of this manuscript.

Much of what I have learned has come from the letters of Warren Buffett to the
shareholders of Berkshire Hathaway Inc. and the letters and speeches of Charlie
Munger. In addition to each company‟s SEC filings, additional data used for
these valuation cases came from multiple online sources. These included:

moneycentral.msn.com, finance.yahoo.com, wikinvest.com,

google.com/finance, and morningstar.com

I have tried to approach each valuation estimation without emotional bias. Any
errors, assumptions, or omissions are my own. In reality, these businesses may
outperform or they may underperform any of my projections.

Bud Labitan

budlabitan@aol.com

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6
 INTRODUCTION

This book offers 30 sample “intrinsic value per share” business valuations in
the style that Warren Buffett and Charlie Munger may use. In each case I tried
to simulate an approach that they would take to valuing a business, based on
what they have written and talked about. However, all of the growth
assumptions used are my own. No consultation nor endorsement was sought
with Mr. Buffett or his business partner Mr. Munger. The examples given here
are chosen for educational and illustrative purposes only. The valuation cases
are estimations written in a style that emphasizes a focus on free cash flow
and the number of shares outstanding. Readers are also repeatedly encouraged
to think about the business‟ competitive position. In reality, these businesses
may outperform or they may underperform any of my projections.

As a book, “Valuations” came about in my mind after I had posted a few

example valuations at seekingalpha.com. I wanted a book that showed cases on
how to sensibly value a business. Previously, I had designed software for myself
that captures data and generates a template report that reads like a
conservatively written document. The reports are full of warnings and
admonitions. For example, take a look at this statement: “More importantly,
before we make a purchase decision, we must decide ( filter #1 ) if XYZ
business is a high quality business with good economics. Does XYZ business
have ( filter #2 ) enduring competitive advantages, and does XYZ business
have ( filter #3 ) honest and able management.”

My first book, "The Four Filters Invention of Warren Buffett and Charlie Munger"
talked about the thinking steps they perform in "framing and making" an
investment decision. I came to the conclusion that the genius of Buffett and

7
Munger's filtering process was to "capture all the important stakeholders" in a
"multi-variable" equation or process. Their rational approach captures Products,
Enduring Customers, Managers, and Margin-of-Safety... all in one mixed
"qualitative + quantitative" process. In my view, their “decision framing
process” was a remarkable advance in Behavioral Finance.

While you will find a lot of repetition of these warning phrases in this book, I
have since gone back and added some material about competitive
advantages and competitive disadvantages, as well as their competitors.

As far as the ability and trustworthiness of each businesses managers, I must

leave this component of evaluation to you the reader. There are hints into their
abilities and trustworthiness hidden in the past performance records and in their
compensation numbers.

Finally, thank you to the folks who run “seekingalpha.com” for allowing me to
post my ideas in Bud Labitan‟s Instablog. I hope you enjoy this unconventional
book, and benefit from the attempts made to advance our knowledge.

8
Chapter 1

An estimated valuation of Apple Inc. AAPL 5/6/2010

Apple Inc. (Apple) designs, manufactures, and markets personal computers,

mobile communication devices, and portable digital music and video players, and
sells a variety of related software, services, peripherals, and networking
solutions. The Company sells its products worldwide through its online stores, its
retail stores, its direct sales force, and third-party wholesalers, resellers, and
value-added resellers. In addition, the Company sells a variety of third-party
Macintosh (Mac), iPhone and iPod compatible products, including application
software, printers, storage devices, speakers, headphones, and various other
accessories and peripherals through its online and retail stores, and digital
content and applications through the iTunes Store. The Company sells to
consumer, small and mid-sized business (SMB), education, enterprise,
government and creative customers. In December 2009, the Company acquired
digital music service Lala.

Last Price $255.99

Does Apple Computer make for an intelligent investment or intelligent

speculation today? Let us do a rough estimation of intrinsic value per share.
Starting with a base estimate of annual Free Cash Flow at a value of
approximately $9,500,000,000 and the number of shares outstanding at
909,900,000 shares; I used an assumed FCF annual growth of 13 percent for the
first 10 years and assume zero growth from years 11 to 15. Review the Free
Cash Flow record here, and think about its sustainability:

http://quicktake.morningstar.com/stocknet/CashFlowRatios10.aspx?Country=US
A&Symbol=AAPL

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The resulting estimated intrinsic value per share (discounted back to the
present) is approximately $243.12.

Market Price = $255.9 Intrinsic Value = $243.12 (estimated) Keep in mind,

and compare that Coca Cola‟s Debt/Equity ratio is .47 or 47 percent; the
Debt/Equity ratio here = 0 Price To Value (P/V) ratio = 1.05 No bargain
appears present at this time.

More importantly, before we make a purchase decision, we must decide ( filter

#1 ) if AAPL is a high quality business with good economics. Does AAPL have (
filter #2 ) enduring competitive advantages, and does AAPL have ( filter #3
) honest and able management. The current price/earnings ratio = 21.7 It „s
current return on capital = 29.12

Using a debt to equity ratio near 0, Apple Computer shows a 5-year average
return on equity = 29.2

The biggest threat to profitability is: Cheaper substitutes and cloned

products. The main competitors are: Microsoft, Hewlett-Packard, Dell, Cell phone
makers, and other small device manufacturers.

The Main Competitive Advantage currently is: Leadership in designing

aesthetically pleasing tech devices like the iPhone, Mac personal computers, and
the new iPad.

Further discussions on competitive pressures can be viewed here:

http://www.wikinvest.com/stock/AAPL

You the reader can insert your notes about management here:

10
Some industries have higher ROE because they require no assets, such as
consulting firms. Other industries require large infrastructure builds before they
generate a penny of profit, such as oil refiners. Generally, capital-intensive
businesses have higher barriers to entry, which limit competition. But, high-
ROE firms with small asset bases have lower barriers to entry. Thus, such firms
face more business risk because competitors can replicate their success without
having to obtain much outside funding.

Growth benefits investors only when the business in point can invest at
incremental returns that are enticing; only when each dollar used to finance the
growth creates over a dollar of long-term market value. In the case of a low-
return business requiring incremental funds, growth hurts the investor. The
wonderful companies sustain a competitive advantage, produce free cash
flow, and use debt wisely.

Does Apple Computer make for an intelligent investment or speculation today?

Time is said to be the friend of the wonderful company and the enemy of the
mediocre one. Before making an investment decision, seek understanding about
the company, its products, and its sustainable competitive advantages over
competitors. Next, look for able and trustworthy managers who are focused
more on value than just growth. Finally ask: Is there a bargain relative to its
intrinsic value per share today?

Great investment opportunities come around when excellent companies are

surrounded by unusual circumstances that cause the stock to be misappraised.
In terms of Opportunity Cost, is AAPL the best place to invest our money today?
Or, are there better alternatives? How will Apple Computer compete going
forward? Technologies change and new technology can emerge. Keep in mind
that a financial report like this is a reflection of the past and present. It may be

11
used to project a future, but it may not account for factors yet unseen.
Therefore, pay attention to competitive and market factors that may affect
changes in profitability.

From the Form 10-Q for the quarterly period ended March 27, 2010, Apple
stated: Although most components essential to the Company‟s business are
generally available from multiple sources, certain key components including but
not limited to microprocessors, enclosures, certain liquid crystal displays
(“LCDs”), certain optical drives and application-specific integrated circuits
(“ASICs”) are currently obtained by the Company from single or limited sources,
which subjects the Company to significant supply and pricing risks. Many of
these and other key components that are available from multiple sources
including but not limited to NAND flash memory, dynamic random access
memory (“DRAM”) and certain LCDs, are subject at times to industry-wide
shortages and significant commodity pricing fluctuations. In addition, the
Company has entered into certain agreements for the supply of key components
including but not limited to microprocessors, NAND flash memory, DRAM and
LCDs at favorable pricing, but there is no guarantee that the Company will be
able to extend or renew these agreements on similar favorable terms, or at all,
upon expiration or otherwise obtain favorable pricing in the future. Therefore,
the Company remains subject to significant risks of supply shortages and/or
price increases that can materially adversely affect its financial condition and
operating results.

Apple and other participants in the personal computer, mobile communication

and consumer electronics industries also compete for various components with
other industries that have experienced increased demand for their products. In
addition, the Company uses some custom components that are not common to
the rest of the personal computer, mobile communication and consumer

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electronics industries, and new products introduced by Apple often utilize custom
components available from only one source until the Company has evaluated
whether there is a need for, and subsequently qualifies, additional suppliers.
When a component or product uses new technologies, initial capacity constraints
may exist until the suppliers‟ yields have matured or manufacturing capacity has
increased.

In summary, using a debt to equity ratio near 0, Apple Computer shows a 5-

year average return on equity = 29.2 . Based on a holding and compounding
period of 10 years, and it is not currently a bargain relative to our intrinsic
value estimation, and a relative FCF growth of 13 percent, then the estimated
effective annual yield on this investment may be greater than 12.5%. Going
forward, are there any transformational catalysts or condition indicators
imaginable on the horizon? Technologies change and new technologies will
appear on the scene. Would brand loyalty keep customers buying here?

SEC Filings online:

http://www.sec.gov/cgi-bin/browse-
edgar?company=&CIK=AAPL&filenum=&State=&SIC=&owner=include&action=
getcompany

Bud Labitan, Author of the new book „Price To Value.‟ Author of 'The Four Filters
Invention of Warren Buffett and Charlie Munger‟

Disclosure: No current positions

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14
Chapter 2

An estimated valuation of ABC, AmerisourceBergen Corp 5/11/2010

AmerisourceBergen Corporation (AmerisourceBergen) is a pharmaceutical

services company, with operations in the United States and Canada. Servicing
both healthcare providers and pharmaceutical manufacturers in the
pharmaceutical supply channel, the Company provides drug distribution and
related services. It distributes an offering of brand name and generic
pharmaceuticals, over-the-counter healthcare products, home healthcare
supplies and equipment, and related services to a variety of healthcare
providers, including acute care hospitals and health systems, independent and
chain retail pharmacies, mail order pharmacies, medical and dialysis clinics,
physicians, long-term care and other alternate site pharmacies, and other
customers. The Company operates in the pharmaceutical distribution segment.
In October 2008, the Company completed the divestiture of its former workers‟
compensation business, PMSI. On May 29, 2009, the Company acquired
Innomar Strategies Inc. a Canadian specialty pharmaceutical services company,
for approximately $15 million CDN ($13.8 million USD) in cash. The company
believes AmerisourceBergen now has the largest and broadest commercialization
service offerings to pharmaceutical and biotechnology manufacturers in Canada

Does ABC make for an intelligent investment or intelligent speculation today?

Let us do a rough estimation of intrinsic value per share. Starting with a base
estimate of annual Free Cash Flow at a value of approximately $900,000,000
and the number of shares outstanding at 283,000,000 shares; I used an
assumed FCF annual growth of 5 percent for the first 10 years and assume zero
growth from years 11 to 15. Review the Free Cash Flow record here, and
think about its sustainability:

15
http://quicktake.morningstar.com/stocknet/CashFlowRatios10.aspx?Country=US
A&Symbol=ABC

The resulting estimated intrinsic value per share (discounted back to the
present) is approximately $43.6.

Market Price = $31.35 Intrinsic Value = $43.6 (estimated) Keep in mind,

and compare that Coca Cola‟s Debt/Equity ratio is .47 or 47 percent; the
Debt/Equity ratio here = .48 Price To Value (P/V) ratio = .72 and the estimated
bargain = 28. percent.

More importantly, before we make a purchase decision, we must decide ( filter

#1 ) if ABC is a high quality business with good economics. Does ABC have (
filter #2 ) enduring competitive advantages, and does ABC have ( filter #3 )
honest and able management. The current price/earnings ratio = 15.5 It „s
current return on capital = 13.91 Using a debt to equity ratio of .48, ABC
shows a 5-year average return on equity = 12.3

The biggest threat to profitability is: Suppliers and Distribution Competitors

like Wal-Mart and the pharmaceutical distribution services of McKesson (MCK)
and Cardinal Health (CAH). The main competitors are: Wal-Mart (WMT),
McKesson (MCK) and Cardinal Health (CAH).

The Main Competitive Advantage currently is:

The AmerisourceBergen RFID system can monitor product placed in shipping

totes as they move through the picking, packing, and shipping processes. As
each tote leaves the distribution center their EPCIS software will record the time
and location of each unit leaving the premises as well as its intended destination
so that AmerisourceBergen has a complete record of the history of all RFID

16
tagged drugs. This is a temporary advantage that ABC competitors can easily
copy.

Further discussions on competitive pressures can be viewed here:

http://www.wikinvest.com/stock/ABC

You the reader can insert your notes about management here:

Some industries have higher ROE because they require no assets, such as
consulting firms. Other industries require large infrastructure builds before they
generate a penny of profit, such as oil refiners. Generally, capital-intensive
businesses have higher barriers to entry, which limit competition. But, high-
ROE firms with small asset bases have lower barriers to entry. Thus, such firms
face more business risk because competitors can replicate their success without
having to obtain much outside funding.

Growth benefits investors only when the business in point can invest at
incremental returns that are enticing; only when each dollar used to finance the
growth creates over a dollar of long-term market value. In the case of a low-
return business requiring incremental funds, growth hurts the investor. The
wonderful companies sustain a competitive advantage, produce free cash
flow, and use debt wisely.

Does ABC make for an intelligent investment or speculation today? Time is said
to be the friend of the wonderful company and the enemy of the mediocre one.
Before making an investment decision, seek understanding about the company,
its products, and its sustainable competitive advantages over competitors.
Next, look for able and trustworthy managers who are focused more on value

17
than just growth. Finally ask: Is there a bargain relative to its intrinsic
value per share today?

Great investment opportunities come around when excellent companies are

surrounded by unusual circumstances that cause the stock to be misappraised.
In terms of Opportunity Cost, is ABC the best place to invest our money today?
Or, are there better alternatives? How will ABC compete going forward?
Technologies change and new technology can emerge. Keep in mind that a
financial report like this is a reflection of the past and present. It may be used to
project a future, but it may not account for factors yet unseen. Therefore, pay
attention to competitive and market factors that may affect changes in
profitability.

From an interesting article about Long-term care pharmacy Chem Rx

Corporation on financierworldwide.com on May 12, 2010:
http://www.financierworldwide.com/article.php?id=6690

Long-term care pharmacy Chem Rx Corporation filed for Chapter 11 bankruptcy

protection on Tuesday along with certain operating subsidiaries. In court
documents, the US company listed assets of $169.7m and debt of $178.3m as of
28 February. “Although the debtors‟ businesses remain strong, the debtors are
too highly leveraged and lack adequate liquidity to sustain operations long term
without a restructuring,” Gary Jacobs, Chem Rx chief financial officer, explained
in court papers. Among the company‟s largest unsecured creditors are
AmerisourceBergen, owed $9.55m, and Anda Generics Inc., owed $6.17m,
according to the court petition. “This restructuring process will provide us with
the court protection necessary to ensure that Chem Rx continues to provide its
services. We expect to reach an agreement with our lenders that will allow us to

18
facilitate a reorganization and position us strongly for the future,” said Jerry
Silva, Chem Rx CEO, in a statement.

In summary, using a debt to equity ratio of .48, ABC shows a 5-year average
return on equity = 12.3 . Based on a holding and compounding period of 10
years, and a purchase price bargain of 28. percent, and a relative FCF growth of
5 percent, then the estimated effective annual yield on this investment may be
greater than 8.3%. Going forward, are there any transformational catalysts or
condition indicators imaginable on the horizon? Technologies change and new
technologies will appear on the scene. Would brand loyalty keep customers
buying here?

SEC Filings online:

http://www.sec.gov/cgi-bin/browse-
edgar?company=&CIK=ABC&filenum=&State=&SIC=&owner=include&action=g
etcompany

Bud Labitan, Author of the new book „Price To Value.‟ Author of 'The Four Filters
Invention of Warren Buffett and Charlie Munger‟

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20
Chapter 3

An estimated valuation of Apollo Group Inc. APOL 5/5/2010

Apollo Group, Inc. (Apollo Group) is a private education provider. The Company
offers educational programs and services both online and on-campus at the
undergraduate, graduate and doctoral levels through its wholly-owned
subsidiaries, The University of Phoenix, Inc. (University of Phoenix), Western
International University, Inc. (Western International University), Institute for
Professional Development (IPD), The College for Financial Planning Institutes
Corporation (CFFP), and Meritus University, Inc. (Meritus). The Company has a
joint venture with The Carlyle Group (Carlyle), called Apollo Global, Inc. (Apollo
Global), to pursue investments primarily in the international education services
industry. During the fiscal year ended August 31, 2009 (fiscal 2009), Apollo
Global completed the acquisitions of BPP Holdings plc (BPP) in the United
Kingdom, Universidad de Artes, Ciencias y Comunicacion (UNIACC) in Chile, and
Universidad Latinoamericana (ULA) in Mexico.

Does Apollo Group make for an intelligent investment or intelligent speculation

today? Let us do a rough estimation of intrinsic value per share. Starting with a
base estimate of annual Free Cash Flow at a value of approximately
$800,000,000 and the number of shares outstanding at 152,000,000 shares; I
used an assumed FCF annual growth of 10 percent for the first 10 years and
assume zero growth from years 11 to 15. Review the Free Cash Flow record
here, and think about its sustainability:

http://quicktake.morningstar.com/stocknet/CashFlowRatios10.aspx?Country=US
A&Symbol=APOL

21
The resulting estimated intrinsic value per share (discounted back to the
present) is approximately $100.34.

Market Price = $56.99 Intrinsic Value = $100.34 (estimated) Keep in mind,

and compare that Coca Cola‟s Debt/Equity ratio is .47 or 47 percent; the
Debt/Equity ratio here = .13 Price To Value (P/V) ratio = .57 and the estimated
bargain = 43. percent.

More importantly, before we make a purchase decision, we must decide ( filter

#1 ) if APOL is a high quality business with good economics. Does APOL have (
filter #2 ) enduring competitive advantages, and does APOL have ( filter #3
) honest and able management. The current price/earnings ratio = 13.8 It „s
current return on capital = 41.33

Using a debt to equity ratio of .13, Apollo Group `A' shows a 5-year average
return on equity = 61.8

The biggest threat to profitability is: Competition from major universities

and technical colleges who offer online educational services at competitive
pricing. There is also the possibility of competition from international colleges
competing in this space when internet speeds increase.

The main competitors are: CECO = Career Education Corp. DV = DeVry, Inc.
ESI = ITT Educational Services Inc. (Industry = Education & Training Services.)

The Main Competitive Advantage currently is: They are a first mover in
leading the transformation of educational service delivery. Further discussions
on competitive pressures can be viewed here:

http://www.wikinvest.com/stock/APOL

You the reader can insert your notes about management here:

22
Some industries have higher ROE because they require no assets, such as
consulting firms. Other industries require large infrastructure builds before they
generate a penny of profit, such as oil refiners. Generally, capital-intensive
businesses have higher barriers to entry, which limit competition. But, high-
ROE firms with small asset bases have lower barriers to entry. Thus, such firms
face more business risk because competitors can replicate their success without
having to obtain much outside funding.

Growth benefits investors only when the business in point can invest at
incremental returns that are enticing; only when each dollar used to finance the
growth creates over a dollar of long-term market value. In the case of a low-
return business requiring incremental funds, growth hurts the investor. The
wonderful companies sustain a competitive advantage, produce free cash
flow, and use debt wisely.

Does Apollo Group `A' make for an intelligent investment or speculation today?
Time is said to be the friend of the wonderful company and the enemy of the
mediocre one. Before making an investment decision, seek understanding about
the company, its products, and its sustainable competitive advantages over
competitors. Next, look for able and trustworthy managers who are focused
more on value than just growth. Finally ask: Is there a bargain relative to its
intrinsic value per share today?

Great investment opportunities come around when excellent companies are

surrounded by unusual circumstances that cause the stock to be misappraised.
In terms of Opportunity Cost, is APOL the best place to invest our money today?
Or, are there better alternatives? How will Apollo Group `A' compete going
forward? Technologies change and new technology can emerge. Keep in mind

23
that a financial report like this is a reflection of the past and present. It may be
used to project a future, but it may not account for factors yet unseen.
Therefore, pay attention to competitive and market factors that may affect
changes in profitability.

From the Form 10-Q of 3/29/10, the University of Phoenix and Western
International University are institutionally accredited by The Higher Learning
Commission (“HLC”), one of the six regional accrediting agencies recognized by
the U.S. Department of Education. Accreditation by an accrediting agency
recognized by the U.S. Department of Education is required in order for an
institution to become and remain eligible to participate in Title IV programs. If
the U.S. Department of Education ceased to recognize HLC for any reason,
University of Phoenix and Western International University would not be eligible
to participate in Title IV programs beginning 18 months after the date such
recognition ceased unless HLC was again recognized or APOL institutions were
accredited by another accrediting body recognized by the U.S. Department of
Education. APOL cannot predict the outcome of the U.S. Department of
Education‟s review of HLC‟s recognition. HLC accredits over 1,000 colleges and
universities, including some of the most highly regarded universities in the U.S.

Regardless of the outcome of the U.S. Department of Education‟s review of HLC,

the focus by the OIG and the U.S. Department of Education on the process
pursuant to which HLC accredited a non-traditional, for-profit postsecondary
educational institution may make the accreditation review process more
challenging for University of Phoenix and Western International University when
they undergo their normal HLC accreditation review process in the future. In
addition, programmatic or location expansion by University of Phoenix and/or
Western International University may result in increased scrutiny or additional
requirements. If this occurred, APOL may have to incur additional costs and/or

24
curtail or modify certain program offerings or new locations at which APOL offer
programs in order to maintain APOL accreditation, which could increase costs,
reduce APOL enrollment and materially and adversely affect APOL business. The
loss of accreditation for any reason would, among other things, render APOL
schools and programs ineligible to participate in Title IV programs.

In summary, using a debt to equity ratio of .13, Apollo Group `A' shows a 5-
year average return on equity = 61.8 . Based on a holding and compounding
period of 10 years, and a purchase price bargain of 43. percent, and a relative
FCF growth of 10 percent, then the estimated effective annual yield on this
investment may be greater than 15.8%.

Going forward, are there any transformational catalysts or condition indicators

imaginable on the horizon? Technologies change and new technologies will
appear on the scene. Would brand loyalty keep customers buying here?

SEC Filings online:

http://www.sec.gov/cgi-bin/browse-
edgar?company=&CIK=APOL&filenum=&State=&SIC=&owner=include&action=
getcompany

Bud Labitan, Author of the new book "Price To Value." Author of "The Four
Filters Invention of Warren Buffett and Charlie Munger"

25
26
 APPENDIX

Effective Yield of a Bargain Purchase after 10-years.

(Chart designed by Mr. Bakul Lalla )

This yield/bargain chart is a teaser that is included here to encourage

readers to read my first book, “The Four Filters Invention of Warren Buffett
and Charlie Munger.” The book is available on Amazon.com.

It is also included to encourage careful sensible investing. How can one use
the chart in long term investing? Once you have a suitable investment
candidate that fulfills the first three filters, estimate the intrinsic value.
Then, using your “estimated discount” ( intrinsic value minus market price
), look to where the discount intersects with a reasonable growth rate.
There you will find an estimate for an effective annual yield on your
investment if it is held for ten years.

27