Dear Diary,
I am reading in my "Value Line Investment Survery" materials that the long bond (30 year treasury bond) appears to be trading at 4.12%, while the Federal Funds Rate is at 3%. This 1.12% difference in numbers is not anything that will cause any panic in my investment calculations, but it does give me pause that neither Warren Buffett nor David Clark, both of whom examined and commented on my work in the past, has ever drawn my attention to this difference. Hum.
I'm studying Hansen Natural (HANS) today. It presents flawless numbers in "Value Line." I'm calling for a financial report tomorrow. With projected earning per share for 2008 at $2.10 per share, I calculate a relative value to the Federal Funds Rate (3%) at $70.00. On the other hand, the 4.12% yield on the long bond discussed above would present a relative value to be $50.97. Warren believes the average of all interest rates is 10%, which offers a relative value of $21.00. HANS is trading at $38.00 per share and growing earnings at 45% per annum.
HANS is not a giant monopoly, so the closer to the 10% calculation I can get, the better.
Gene
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2005, In Front of IRS Building, Washington, D.C.
Diary of a Business Investor
Gene Chapman
2005, In Front of IRS Building, Washington, D.C.
About Me
- Gene Chapman, Author
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