THE LITTLE BOOK OF VALUATION (BY ASWATH DAMODARAN)
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- เผยแพร่เมื่อ 31 พ.ค. 2024
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Top 5 takeaways from Aswath Damodaran’s The Little Book of Valuation:
00:00 Intro
01:05 1. Two valuation approaches: Relative & Intrinsic value
02:12 2. A quick guide to relative valuation
05:05 3. A quick guide to intrinsic valuation
09:17 4. Truths about valuations
11:26 5. Context matters: Growth, Decline and Cyclicals
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My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there - investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties - I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process - upgrading your money-making toolbox.
A playlist on how to value stock market companies: bit.ly/2TqP00s
Are there any books out there on valuation that are 50 pages or less? I'm convinced the subject could be condensed down to that number of pages (or less) and still be thoroughly explained. I just haven't found anything like that yet though.
Can you make videos on other books of aswath damodaran like
1. Applied corporate finance
2. The dark side of valuation
It would mean a lot to me !
Thank you for your suggestions Affan Siddhiqui! I will add them to my reading list. This comment did receive a lot of likes for a book suggestion, so I'll definitely check them out.
@@TheSwedishInvestor thanks and by the way you're doing a great job it's tough job to just take minimum take aways from a book and present such quality content
Thanks for the value your channel helps me a lot
Keep growing !
SI, I think you're making some of the highest quality videos on TH-cam today. Peace! And thanks!
Glorified Truth I appreciate it! Thank you for your support! 😁
The author of the book has a TH-cam channel. His philosophy is amazing
His channel seems to be paradise for any quantitative investor. Thanks for telling us about it Vikrant C.! 🙌
What is his channel? i want to subscribe and watch his videos?
@@dianaahmadi7380 just type in his name and you'll see
You can literally take the NYU MBA class for valuation from your couch.. for FREE!! WOW!! Crazy times we live in..
The DCF bit would've worked much better with an actual example of a company. Like even just with the discount rate bit, I was unable to understand how a 15% margin results in 1000 dollars being worth 870 next year.. shouldn't that be 850? 😕
If I am gonna choose ten undervalued TH-cam channel, you are definitely one of them. Keep up your good work, really appreciate that!
I was going to ask you to summarize this book on another video, and you already did it! Earned my sub.
This book was my gateway into the world of Damodaran, a great place to be. He is one of my four great gurus, along with Buffett, Munger and Lynch.
This video helped me get a raise ! I simply identified what our operation was worth evaluated the local competition ! Then evaluated our service to theirs our price to theirs . I discovered we are not i direct competition with our closest competitor because our service is superior ! We are in fact in competition with the lesser informed customer who is just driving past ! We have already secured the local communities trust with a superior service !
I have had this book sitting on my shelf for about 2-3 years.. I'm gonna pick it up this week and read it cover to cover thanks to your video. It's been on my to read list but there is just so many good reads out there too.
Reading this one right now! The "little book" series is great! The only exception is the installment about canadian real estate - that book is a sales pitch for the authors website/community! 🤣
On the other hand, The little book of valuation is great!
Could you give an example of using the intrinsic value formula in this video? So I could better understand it. 😊
Your videos are amazing, thank you!
Great explanation. I'm seeing this video before I start reading the book. Thanks :)
*Thanks for sharing these tips!* 👍
Some people read book and than watch your videos some, don't get to read so that's why they watch yur videos. But this video has compelled me to read the book.
Thank you for taking the time to explained this to us. I just sub
Damodaran is a legend
High quality video !
I'd love to see a video of you finding a stock, putting it through your filters and then determining if its good value or not. I really wanna have some kind of metric system and process to put stocks through but I've yet to figure out what the simplest and most usefull key numbers would be
I plan on doing just this soon.
Petter Johansson I suggest going to his TH-cam channel to take his valuation class. Then go to damodaran.com where the author has valuation models to use. All you need to do is plug in the numbers. It is all free.
Great video 👍👍👍
Thanks!
I’m actually reading this book, and taking courses on this, 10 forecasted is way crazy! 4 most. But it’s subjective so!
Nice vídeo!
Thanks for another great video!
2 of my favourite books are Valye investing: From Graham Buffett and Beyond and Competition demystified a radically simplified approach to business strategy. Both are by Bruce Greenwald.
They focus much more on a companies strategic position in the market for valuation. It also breaks the valuation into 3 parts: assets, current Earnings power value (no growth) and in a very select instances growth.
He is also very critical of DCF. He agrees with it in principle but the model is too sensitive to small errors in either growth or discount rate.
I think you and your viewers would get a lot out of it - I sure have.
And I would very much like to hear the takeaways you would get from them!
I plan on covering these
The way I do it is 10 years of PE (ajusted for expected growth and inflation) Plus PB ajusted for inflation
I use 3%, 5% or 8% for growth depending on the type of companie and 2% inflation
It seems to be a pretty good screaner at least for backwards looking performance... plus it's pretty easy to do, just one Google search away (1 per companie, about 500 per index)
Hey Vitor Schroeder Dos Anjos, thank you for sharing. Interesting stuff. Just to clarify - do you mean that you extrapolate either 3, 5 or 8% earnings growth depending on the company and then you look at where earnings would be in 10 years because of that? Then compare that to today's price?
Thanks
You should also make a video on investment fable, also from professor Damodaran
Best vlog
11:10 i saw that "Corona"
yes and he said to leave it out, in just 3 weeks the crash occurs and corona changes the world
Very very nice video sir 👌
Please make video on trading book summary
Great job.
🙌
Awesome
Great video keep it up!
🌟
Lots of value appearing after this market sell off. 📉👀 Time to put some money to work in those undervalued companies! 🚀📈😎
It's always a good time to put money in undervalued companies 👍
The Swedish Investor 👍
Damodaran is the Dean of missing out
Good 👍👍👍
This is more qualitative than quantitative with example calculations.
Great video as usual, the little book of valuation is the first book I read about value investing, I really liked the idea of capitalazing research expenses
Cheers Alex Pagano! 🌟 Agreed. I also liked the idea of treating companies with lots of intangibles differently from this perspective 👍
Owners earnings concept is first mentioned in 1986 by Warren Buffet and it does not include changes in working capital. Also in ‘buffet style’ book it is formulated as net income+non-cash-maintanence capital expenditures. Swedish Im your biggest fan pls answer this:)
talking life
Nice veideo
Would love to see a review of 'The Young Investor' book.
I have it on my list to do
@@FinancialWisdom I'm the author in case you didn't know!
@@vikrantc.358 Hi - The author of the book I had I mind was - Katherine R. Bateman. Sorry lol
In Moroco good pro
Thank you so much, by the way, what software are you using for the doodle videos?
It's videscribe.
Super !! One more tool to put me in the right direction.!! thanks 💪💪 ⭐
Glad you enjoy the content Jean Police 😁🌟
You would do well to create a course/a structure that those who want to learn investing can follow.
Thank you, Sir; I have been taught by stalwarts at IVY league B-school; but none put it across so well. God bless you
Very nice video as usual. If you were to compare Damodaran's methods against those of Greenblatt, Buffett and Lynch, which one would you say is more pragmatic for the future and why?
Thank you and great question andagape. If you aren't willing to spend too much time on you investments (say 8+ hours per week) I'd go with Greenblatt and The Magic Formula, it's simple and should beat index investing in my opinion. If, however, you are willing to spend some time researching individual companies and industries, I'd go with Buffett and investing in wonderful companies at fair prices for the long run. Doing this will require that you enjoy the investment process, otherwise I think it will be unbearable to spend so much time researching companies :) I'm with Buffett.
It will be great if you try to give examples
Sir, your channel is a gift! Consistently good content and graphics / examples. You don’t talk down to the common investor; But, you don’t make things overly easy either.
You will get lots of likes; And. your subscriptions are well earned!
Thank you for all the great info! It is very much appreciated. And cheers!
I appreciate the support Bmayo27! Hope to be able to produce more valuable videos for you in the future!
Ok
How can I get the discount rate? Does it always have to be 15%?
Both approaches have its own flaws and biases. That is why valuation practitioners should perform sensitivity analysis on major variables that likely have tremendous impacts on the target share price. For instance, cost of equity, cost of debt, terminal growth rate, high-growth rate are a few variables to be considered. Montecarlo simulation also helps solidify the valuation as well. Though the video is only about 14-minute long, it walks us through the whole book, u receive very much appreciation and I will likely to follow your channel.
That's a good addition to the summary Mam Sithsamnang! Always add a margin of safety to guard against such fluctuations in primary variables, and if the future seems like it could be pretty much anywhere, pass and go to the next stock instead.
Nice vid but you didnt show how to value stocks. I need practical steps as well as the general philosophy
Love your videos. But this one was hard to follow along. I still don’t understand how to value companies after watching this.
5:52 sorry mate I'm indifferent for this purpose. both has the same expectancy. The first Dilemma isn't even a Dilemma :>
5:34 1000 per year as money always grows in future
5:43 1000 now as l'm pretty sure about my luck.
*same thing that happen with dotcom stocks will prolly happen with pot stocks if and when weed become legalized in nnn the u.s. of a*
👍🏼👍🏼👍🏼
Have added you to my playlist on TH-cam channel cheers Frank Gardiner private citizen Melbourne Australia
we can calculate the prior year owners earnings through th financial statements,but how can we calculate the next 10 years??
You can't. But if you pick the right companies and study them a lot, you will be able to improve your odds of estimating them correctly :)
@@TheSwedishInvestor so how can i estimate them??
@@kall4789 fluke
@@thegoat5587 ?
📙💯
🙌
Aswath Damodaran's TH-cam channel @ youtube.com/@AswathDamodaranonValuation
7:18 share of a company
i love your videos
But this video is too difficult for me to understand :(
I can't understand how I'll apply this
It's one of the more difficult ones that I've covered, for sure. The concept of intrinsic valuation may take some time to understand, but I encourage you to try to understand it still. For me, it's one of the most useful tools for investment decisions. I recommend googling for "discounted cash flow analysis" to learn more.
@@TheSwedishInvestor Thank you :)
SM chess I suggest going to Damodaran’s TH-cam channel to take his valuation class.
Uhhh after watching this im sticking to indexing 😆
Can you please make a video with real examples.
Why pewdiepie did a investing chanel
You're not 100% correct, just look at TSLA. Also at 5:55 100% of WSB will pick the coin and then ask if they can do it again.
Summarize Buffettology!
Here's a tip, Save enough money so that you can quadruple it when markets crash
anyone else watching this at 0.75 the speed?
Assuming you have 2 different companies, each with an intrinsic value of $100 and current price of $50. How do you decide which stock to buy?
I feel that this is something the book did not explain.
Hey Mark Khoo! That will be an exceptionally rare case in my opinion, but I'd say that in this situation you should invest in both. Even if you already own 5 companies and thinking about investing in a 6h one, if these two companies rank as the 6th most interesting purchases on a discount to intrinsic value basis, you should split your money in both of them.
Do you have any videos that are practical?
Almost all videos are "selling the obvious" bag of crap in these 'investing' videos. Over 5 videos on "how to calculate intrinsic value" and NONE of them actually practically teaches you how to calculate/estimate the intrinsic value of a company.
Total waste of time!
Have you read security analysis or the intelligent investor? Mind you security analysis is laborious but it goes into great detail of valuing companies using the balance sheet and Income statement.
There are flaws in damodaran reasoning. Just the relative value approach... if you can compare a company to several other ones to pick the cheapest, you know you are picking a company that doesn't have a competitive advantage. Not the best situation if you ask me
I don’t think so. Competitive advantages show them selves by having a higher ROIC/ROE. Coca Cola can then be compared to Pepsi or a ‘no name’ cola. They do the same thing (more or less). But coke and Pepsi have a ROIC if 20% instead of 8% for the no name brands.
I think it is very important to add additional variables for a comparative analysis to be useful (step 3 in the video). I agree with Jack Strudwicke that ROIC/ROE would be a good one to add. I still think that price is the most important measurable variable though, simply because it's the most trustworthy one. If you buy at a PE of 80, you can be sure that you got a stock with a PE of 80. If you buy a stock with 20% annual earnings growth, you can't really be sure that the company can maintain that growth.
Let me rephrase. In the video you show examples of comparing companies that do pretty much the same, and buy the cheapest one. Then you go to amazon and say its not so easy to find a comparison, (i agree with you). Now, if we follow phil fisher's definition of competitive advantage, what we want would be a company like amazon, and not one that can easily be compared to others.
Agree but there are very few if any companies other than Amazon like that. Mining companies are a great example. They more or less have the same assets but depending on location it will greatly affect the returns they can achieve from these assets. For instance Australia has a lot of iron ore but is also close to China and Asia which are the major growing markets. The differences in the assets are relatively small but their competitive advantages are huge!
This convinced me even more to stay with warren buffett and not with this guy.
@@ktanner8994 they disagree on many things and buffett is often criticised by him
Aswath "Dono"daran has failed on valuing Amazon and tech growth stocks a million times over. He made up a staunch religion, comparable to Scientology for valuation, and tries to apply it to all different types of companies. This is his failure.
One should always be careful trying to apply the same type of model to all types of companies. Some things must go into the "too hard pile" as Buffett and Munger call it.
You do realize that there is no polar bears 🐻❄️ in sweden? 😅
Haha I think the logo started as an inside joke when I was an exchange student and people thought that we had polar bears roaming the streets in Sweden. I'm hoping to be able to fake that one until we make it.
@@TheSwedishInvestor nice try 😂
Same people think Ragnarok is still the king i guess
Copy off a little book of value investing
it is totally confusing and complicated book
This is very badly explained...
Intrinsic valuation .. my ass, then comes dot com bust, banking crisis, covid 19, etc. Use your head, don’t waste your time listening to garbage videos.