Hi March09There is a problem with that logic. In the example you...

Hi March09

There is a problem with that logic. In the example you give you are using ANG as the comparison to say that RCR is undervalued. Since the intrinsic value of a business growing at a faster rate is so much higher than one growing at a slower rate, they should implicitly command different prices.

I.e. (some very rough examples here) if you know you are going to get a 10pc dividend in purpituity, you might pay 10x that businesses annual earnings. (in reality a lot more if there was no risk!)

But if you know that the earnings will pay a 10% dividend and grow that dividend by 10% a year for the next ten years and then level off after that, you could easily pay 20x its earnings and still be getting better VALUE i.e. buying it cheaper.

So my point is, ANG should be, and is, trading at a higher multiple. RCR should be, and is trade at a lower one. Simply based on their future cashflows.

So I think you need to be very careful thinking its undervalued by a huge amount, or that ANG is overvalued. Your analysis is to simplistic.

Also, your short term strategy is very much like catching a falling knife. I know the technical analysts would say shame on you for buying in a downtrend - and the tech analysts (only the very best ones at that - perhaps 5%) are really the only players I think who can make short term gains consistently.

Good luck with your short term investment March09 - Personally I can't predict short term price movements with any accuracy (the market is to crazy) I only like to buy businesses that I know will be worth more in future years than they are today.

One thing we do agree on however, is you want to buy businesses for less than what they are worth. Its just out methodologies we employ, and the timeframes that differ.

A business is worth the present value of all its future cashflows. If you get more interested in investment, as opposed to short term trading, I urge you to study Discounted Cash Flow Valuation and Buffetts model of same, to truly understand the meaning of intrinsic value and how you can find out if you are buying a business cheap or not.

Good luck with your holdings March09 I sincerely hope it RCR lathers you with riches in the short term. :)

Cheers
Sauce