Myth 5.2: As g-> r...To Infinity and Beyond!
In my last post, I started off by providing a rationale for a terminal value and presented alternatives to the perpetual growth model. That said, most DCFs are built with the the perpetual growth...
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Myth 5.3: Growth is good, more growth is better!
The perils of holding all else constant in perpetual growth equations and playing with individual inputs, not only leads to the use of impossibly high growth rates but also inflates the importance of...
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Myth 5.4: Negative Growth Rates forever? Impossible!
As you peruse discounted cash flow valuations, it is striking how infrequently you see projections of negative growth into the future, even for companies where the trend lines in revenues and earnings...
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Myth 5.5: The Terminal Value ate my DCF!
When you complete a discounted cash flow valuation of a company with a growth window and a terminal value at the end, it is natural to consider how much of your value today comes from your terminal...
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Active Investing: Rest in Peace or Resurgent Force?
I was a doctoral student at UCLA, in 1983 and 1984, when I was assigned to be research assistant to Professor Eugene Fama, who wisely abandoned the University of Chicago during the cold winters for...
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Active Investing: Seeking the Elusive Edge!
In my last post, I pointed to the shift towards passive investing that has accelerated over the last decade and argued that much of that shift can be explained by the sub-par performance of active...
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January 2017 Data Update 1: The Promise and Perils of "Big Data"!
Each year, for the last 25 years, I have spent the first week playing Moneyball, with financial data. I gather accounting and market data on all publicly traded companies, listed globally, and then try...
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Narrative and Numbers: How a number cruncher learned to tell stories!
When I taught my first valuation class in 1986 at New York University, I taught it with numbers, with barely a mention of stories. It was only with the passage of time that I realized that my...
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Almost time for class: My Line Up for the Spring Semester!
If you have been reading my blog for awhile, you should be familiar with the routine at the start of every semester. If I am teaching that semester, I list the classes that I will be teaching, describe...
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January 2017 Data Update 2: The Resilience of US Equities!
If asked to list the biggest threats to US equities at the start of 2016, most people would have pointed to the Federal Reserveâs imminent retreat from quantitative easing and the possibility of a...
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January 2017 Data Update 3: Cracking the Currency Code
There was a time in the not so distant past, where analysts could do their analysis in their local currencies and care little or not at all about foreign currencies, how they moved and why. This was...
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January 2017 Data Update 4: Country Risk Update
In my last post, I pointed to currency confusion as one of the side effects of globalization. In this one, I will argue that as companies and investors globalize, investors and analysts have no choice...
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January 2017 Data Update 5: A Taxing Year Ahead?
There are three realities that you cannot avoid in business and investing. The first is that your returns and value are based upon the cash flows you have left over after you pay taxes. The second is...
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January 2017 Data Update 6: A Cost of Capital Update!
I have described the cost of capital as the Swiss Army knife of finance, a number that shows up in so many different places in corporate financial and analysis and valuation and in so many different...
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January 2017 Data Update 7: Profitability, Excess Returns and Governance
If asked to describe a successful business, most people will tell you that it is one that makes money and that is not an unreasonable starting point, but it is not a good ending point. For a business...
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January 2017 Data Update 8: The Dark and Light Sides of Debt
There is no aspect of corporate finance where morality plays a bigger role than the decision of how much to borrow. That should come as no surprise. For generations, almost every religion has...
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January 2017 Data Update 9: Dividends and Buybacks
If you are from my generation, I am sure that you remember Rodney Dangerfield, whose comedy routine was built around the fact that "he got no respect". This post is about dividends and cash return, the...
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Apple: The Greatest Cash Machine in History?
As as sports fan, watching Brady and Belichick win the Super Bowl, Roger Federer triumph at the Australian Open and LeBron James carry the Cleveland Cavaliers to victory over the Warriors, it struck me...
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My Snap Story: Valuing Snap ahead of it's IPO!
Five years ago, when my daughter asked me whether I had Snapchat installed on my phone, my response was âSnapwhat?". In the weeks following, she managed to convince the rest of us in the family to...
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Explaining a Paradox: Why Good (Bad) Companies can be Bad (Good) Investments!
In nine posts, stretched out over almost two months, I have tried to describe how companies around the world make investments, finance them and decide how much cash to return to shareholders. Along the...
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