Buffett's Value Investment Theory Based on Improved DCF Model

Abstract

With the development of global economy, the investment theory of capital market needs to be further developed in order to provide investors with various references in the process of value investment. Value theory is very important for international investors. Since Graham put forward the theory of value investment, he has always emphasized the importance of discounted cash flow model (DCF model) in investment evaluation. Therefore, the DCF model has great influence on investment. In order to provide some domestic investors with value-added analysis methods when investing, we will investigate the practical theory of improving the DCF model in extreme environment. Based on the theory of value investment, time series analysis is introduced to improve the DCF model. The improved DCF model can estimate the original value of an enterprise by combining the factors that affect the change of enterprise value. In the research of securities investment, considering that the existing DCF model based on the American capital market has some shortcomings in domestic capital market, it needs to be improved. To forecast the future cash flow, the time series analysis method should be used instead of the sales ratio method. American investor Warren Buffett's philosophy and practice of value investment have been paid attention to and studied by the world. Value theory is a series of famous theories put forward by Graham and applied and developed by Buffett. By combining the improved DCF model with Buffett's personal business experience, this paper analyzes and summarizes the relevant contents of Buffett's value investment theory based on the improved DCF model and puts forward some suggestions worthy of reference for Chinese investors.