Case Study 1: Setting Some Themes (Case 1: Warren Buffett, Case 2: Bill Miller and Value Trust

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CASE 1: Warren Buffett From Warren Buffett’s perspective, “intrinsic value is assessed as the present value of future expected performance” (Bruner, Eades, & Schill, 2010): in order to determine whether the investment is worth and is therefore fairly operating on the principle of achieving value for this investment. The displays volatility in earning corresponding to the fluctuation of prices will give investors the cheapest price when the investment shown by the discounted-flows-of-cash calculation.
The theory of intrinsic value is significantly important, as it shows the relative attractiveness of investments and businesses, not just simple stock (Carbonara, 1999).
The estimation of intrinsic value based on the two elements, which
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The diversification of portfolio does not mean purchases of entire businesses at control prices that ignore long-term economic consequences to the shareholders. Fund managers must act with shareholders’ money as acting with their own (Bruner et al., 2010). The increase in the stock price of Scottish Power (PacifiCorp’s parent) by 6.28% and Berkshire Hathaway by 2.4% indicates a market approval for the acquisition and created benefit for investors in 2005. However, there is one thing need to be considered which was the merger and acquisition against law or a variety regulations no matter this investment is risky or not. The PacifiCorp deal was expected to close after the federal and state regulatory reviews were completed, sometime in the next 12 to 18 months.

CASE 2: Bill Miller and Value Trust Over 15 years, Value Trust had had an average annual total return of 14.6%, which was greatly exceeded the S&P 500 by 3.67% per year. Value Trust grew from $750 million in 1990 to more than $20 billion in 2006. An investment of $10,000 in Value Trust in 1982 would have grown to more than $330,000 in 2005 (Bruner et al., 2010).
In making that assessment, the benchmark was used as annual total return, which indicates the performance of a mutual fund, measured as following:
Annual total return = (Change in net asset value +Dividends+Capital-gain distributions )/(Net asset value (at the begining of the year))
Net asset value = (Market

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