Berkshire Ruminations

Thursday, June 05, 2008

RBP Investing

As some readers may know, I recently started writing a couple of new blogs. One is called RBP Investing. RBP stands for Required Business Performance and was developed by a company in New York called Transparent Value.

RBP is a proprietary stock analysis methodology that, although not something Warren Buffett himself would use, is completely consistent with all of his ideals. It looks at companys in reverse, by starting with the stock price and deducing what the market expects of the company, in terms of both revenue as well as actual product sold. From this, the investment question becomes something more like "Does the market valuation make sense?" or "Can this company actually deliver what the market expects?" They call this reverse discounted cash flow analysis.

This made perfect sense to me, being someone who believes DCF analysis is the only legitimate way to value a stock. The RBP method is a pretty ingenious way of looking at things and has the potential, I think, to become mainstream now that Dow Jones has started publishing the RBP Index Series. I encourage readers to check out out the blog at


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