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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sean Collett who wrote (74671)	12/29/2023 8:48:47 AM
From: E_K_S	Read Replies (3) \| Respond to of 78767

Really never heard of this guy . . Aswath Damodaran: The "Dean of Valuation" Aswath Damodaran is a highly respected name in the world of finance, particularly known for his expertise in corporate valuation. He holds the titles of Professor of Finance at NYU Stern School of Business and "Dean of Valuation", bestowed by Wall Street for his exceptional contributions to the field. He hasn't actually written a formal thesis on equity valuation, as he is a professor and author, not an academic with a traditional thesis requirement. However, his prolific contributions through countless books, articles, lectures, and online resources (including his popular blog and YouTube channel) have shaped the modern understanding of equity valuation in profound ways. Here are some key points about Damodaran and his approach to equity valuation: He champions a practical and accessible approach, emphasizing clear principles and frameworks over complex formulas. He stresses the importance of integrating both quantitative and qualitative factors in valuation, balancing numbers with a strong understanding of a company's story and competitive landscape. He advocates for critical thinking and challenging assumptions, urging investors to be skeptical of overly optimistic projections and hidden risks. He promotes transparency and accessibility in financial information, believing that everyone should have the tools to understand how companies are valued. Some of his most influential works on equity valuation include: "The Dark Side of Value Investing" "Investment Valuation: Essentials of Theory and Practice" "Narrative & Numbers: The Art of Intelligent Valuation" "Applied Corporate Finance" Damodaran's work has earned him recognition as a leading authority in valuation, influencing academics, analysts, and investors alike. While he may not have a traditional thesis, his vast body of knowledge and practical guidance effectively serve as a comprehensive resource on equity valuation for practitioners in the field.

To: Sean Collett who wrote (74671)	12/29/2023 9:06:11 AM
From: Harshu Vyas	Read Replies (3) \| Respond to of 78767

More like that one book was the nail in the coffin. I'll share the list that has changed my perspective: Financial Fine Print, Profits you can Trust, Financial Shenanigans, The Financial Numbers Game, Quality of Earnings, Valuation, The Quest for Value... and some others. Worth noting that most of these books were written more than a decade and a half ago. The situation's only gotten worse but nobody wants to write books about it. (FWIW, I'm not a fan of all of these books. They just changed the way I viewed certain concepts.) Pro forma earnings are bad enough and are the most obvious deceptive practice used by corporations. But the fact is that earnings have been slowly getting more irrelevant - just look at the effects of earnings "beats" or "misses" on share prices. It's usually minimal and it's the guidance that sends the share price rocketing. And now cash flows are also getting manipulated. Hence, you have to adjust them. To me, the adjusted, normalised free cash flow is the equivalent of earnings a century ago. And in fifty years it will be different as investors become smarter. I have no doubt this will be the case. There's this notion that's come about that free cash flow (unadjusted) can be used to measure whether a company can pay back its debt. I blame Burry for this through his oversimplified tweets. It's led to such poor, sloppy analysis. If a company has a low debt/fcf ratio, it doesn't mean anything unless the quality of that free cash flow is high and sustainable. Firstly, take out SBC. Secondly, is the company growing, downsizing or maintaining its market position? It matters when it comes to cash flows (i.e downsizing companies will generate higher levels of cash flow) and the working capital cycle. Thirdly, what is average capex? Not maintenance capex. Total capex. If a company is investing for growth, you have to assume that continues. But what about dividends and/or share buybacks? That also has to continue especially if shareholders are getting diluted through employee incentive schemes. Also, you have to take out one-time charges (from litigation that favoured the company etc) that boost cash flows. Then you can work out the residual. But then you have to account for acquisitions. How can you be sure that management will use that cash flow to pay down debt? If they want to be "opportunistic" in times of stress... OXY is an example (although, the oil industry isn't stressed). I suppose the streaming companies is a better example. The truth is most companies cannot completely pay down their debt through cash flows, anyway. I maintain that today's cash flow is yesterday's earnings. Most leveraged companies of today will have no choice but to refinance at higher rates or dilute shareholders through equity offerings. I think the majority of the people on this thread use free cash flow for some analysis. Free cash flow is non-GAAP. Go back to the days of Milken - he evaluated companies to lend to by using cash flows not earnings and was one of the first to make that change. And it's where EBDIT and then EBITDA later on stemmed from. Buffett later criticised such methods but, in certain cases, it's highly useful. I truly believe that you can make 50%/annum if you're determined enough. But you can't use old tricks. The days of NCAV are over but there's still deep value on offer for those brave enough to find it. Of course, this is slightly watered down.