Warren Buffett's perspective, what is the intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them?

Intrinsic value is concisely summed up by Warren Buffett as "the present value of future expected performance" (Bruner, Eades, & Schill, 2009). This intrinsic value can summarize how well a company is run, its cash flow and places a premium on management competency. Intrinsic value is thought to be important in value investing as it allows Buffett to identify stocks or businesses which are undervalued. This is important because value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value (Intrinsic Value, 2012).

Buffett readily admits that intrinsic value is highly subjective (Bruner et al., 2009). Buffett's...
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