Valuation

This category contains 52 posts

How Venture Capitalists (VCs) Mark-to-Market

A recent WSJ article titled Andreessen Horowitz’s Returns Trail Venture-Capital Elite triggered a swift response from Scott Kupor, the managing partner at Andreessen Horowitz, and Damodaran also chimed in on the issue with a follow-on article. The articles carry some good nuggets of information, namely on how VCs “mark-to-market”. VC Marks Are Not a Measure of Performance Scott … Continue reading

Damodaran: How to Enhance Firm Value and the Value of Control

I came across this presentation by Aswath Damodaran on the value of control (link here). It wrote about the different ways to optimize the value of a company, as well as propose a framework to think about the value of control embedded in market prices, transaction prices, and the prices of voting/non-voting shares. Quick summary below: … Continue reading

Ira Sohn Conference 2014: Summary of Calls

I was reading about the Ira Sohn Conference (May 5, 2014) that just ended. Some quick notes on the speakers and their ideas MichaelNovogratz (Fortress Investment Group) Long Brazil if President Dilma loses election ChrisShumway (Shumway Capital) Short Chinese Yuan (CNH) Long Moody’s JeffreyGundlach (Doubleline Capital) Short S&P Homebuilders ETF (XHB) PhilippeLaffont (Coatue Management) Long Liberty … Continue reading

Basics of Economic Profit (aka Economic Value Added)

Definitions Economic Profit (EVA) = Net Operating Profit After Taxes (NOPAT) – Capital Charge = NOPAT – (Cost of Capital * Invested Capital) = (NOPAT / Invested Capital) * Invested Capital – (Cost of Capital * Invested Capital) = (Return on Investment – Cost of Capital) * Invested Capital Invested Capital = Working Capital + … Continue reading

Book Review of The Big Secret for the Small Investor by Joel Greenblatt

I always love reading books by Joel Greenblatt. His books are pretty short and concise which is how I like it, and his first book “You Can Be a Stock Market Genius Even if You’re Not Too Smart” is by far the best book on investments that I have read so far. His 2nd book on … Continue reading

Book Review of The Conscious Investor by John Price

I haven’t been writing new posts for quite some time, though I have been learning a lot during these past few months but have not found time to sit down to record my learnings. Regardless, I picked up this book recently by John Price, titled “The Conscious Investor: Profiting from the Timeless Value Approach”. This is … Continue reading

Valuing Financials

In James Montier’s "Value Investing: Tools and Techniques for Intelligent Investment" book, he has an article on whether Financials are a good opportunity at that time or are they a value trap (previously in Mind Matters (13 August 2008) from his time at Societe Generale). It has some good statistics about the banking sector, and … Continue reading

Theoretical Valuation Methodologies (FCFF, FCFE, CCF, and APV)

4 major theoretical valuation methodologies: Discounting Free Cash Flow to the Firm (FCFF) at the Weighted Average Cost of Capital (WACC) Adjusts for the tax benefit of debt from the cash flow numerator (i.e. FCFF should be calculated as though the firm is all-equity financed) because it will be handled by a smaller WACC denominator (due to … Continue reading

Book Review: Sources of Value

Book: Sources of Value by Simon Woolley (BP) Review: Interesting topic. This aims to break down NPV and attribute the components into identifiable advantages of a company over its competitors. Most of the time when you identify sustainable competitive advantage for a company, its terminates as a qualitative judgment. This book takes it one step … Continue reading

Book Review: Valuation for Mergers, Buyouts and Restructuring

Book: Valuation for Mergers, Buyouts and Restructuring, by Enrique R. Arzac (Columbia University) Review: Excellent book on valuation theory! Highly recommended! Key Points: Unlevered net income = net income + (1 – tax rate)*(interest expense – interest income) Unlevered net income  + change in deferred taxes = net operating profit after tax (NOPAT) NOPAT + … Continue reading

Book Review on Valuation: What Assets are Really Worth

Book: Valuation: What Assets Are Really Worth by Alfred M. King Review: Good book on Valuation as a profession and how to value all kinds of things. Key Points: Cost, Value, and Price Appraisers determine value. Cost and selling price are aids in determining value. Value is the amount at which willing buyers/sellers are willing … Continue reading

Newcastle Investment Corp (NCT)

I first came across NCT from one of Wally Weitz letters which highlighted NCT and Redwood Trust (RWT) as potentially good investments (during the mortgage crisis, Wally sold out of NCT). I am starting to look into NCT currently to assess its value as an investment. From the latest 10-Q (31 March 2010), the adjusted … Continue reading

Howard Ward’s Valuation Methodology (Gabelli Funds)

The points here are summarised from an interview with Howard Ward (Gabelli Funds) conducted by Kirk Kazanjian in his book Wizards of Wall Street. Without question, 1992 and 1993 both were difficult years for you [Aside: drug stocks hammered due to health-care spending concerns + threat of federal health-care and drug-price regulation when the Clintons … Continue reading

Robert Torray’s Investment Approach (Robert E. Torray & Co.)

The points here are summarised from an interview with Bob Torray (Robert E. Torray & Co.) conducted by Kirk Kazanjian in his book Wizards of Wall Street. What have you learned over the years? How has your investment approach matured? It is a tough way to make a living by investing in obscure companies, special … Continue reading

Frederick (Fritz) Reynold’s Valuation Methodology (Reynolds Funds)

The points here are summarised from an interview with Fritz Reynolds (Reynolds Funds) conducted by Kirk Kazanjian in his book Wizards of Wall Street. Look for companies with above-average growth characteristics, strong unit growth (>= 13%), are well managed, and enjoy good pricing power. Often that might be the number one or two company in … Continue reading

Bill Miller’s Valuation Methodology (Legg Mason)

The points here are summarised from an interview with Bill Miller (Legg Mason) conducted by Kirk Kazanjian in his book Wizards of Wall Street. How do you figure out what a company is worth? We use what we call a multifactor valuation methodology, i.e. we look at the value of the business every possible way … Continue reading

Stable Growth Rate for DCF Terminal Value

Came across this web page by Damodaran which highlighted some good points on the stable growth rate (link here): The stable growth rate cannot be greater than the overall growth rate of the economy, since if a firm grows forever at a rate higher than the growth rate of the economy, it will be bigger … Continue reading

Misleading P/E Charts

I was reading an article by John Price on GuruFocus.com (link here) that wrote about Tobin’s Q. It showed a graph illustrating that Robert Shiller’s P/E ratio (price divided by the average earnings per share over the previous 10 years) is a good proxy to use for the comparison between Tobin’s Q with its long-term … Continue reading

Valuing Berkshire Hathaway

From what I’ve read so far, its tough to value Berkshire Hathaway. I thought it would be useful, as I come across any such articles, to note down how others have valued Berkshire. Here’s some: Barron’s on 13 Aug 07 carried an interview with Gifford Combs, Managing Director and Portfolio Manager of Dalton Investments (link … Continue reading

Valuation Methodology of John Price from www.conscious-investor.com

I stumbled upon an article by John Price published on GuruFocus.com, which led me to his website http://www.conscious-investor.com. He has put together a neat software that supposedly implements Buffett’s methods. While the software is not free, the website does come with a few videos that showcase the software. If you take a look at the … Continue reading

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