I came across this online valuation course run by Professor Aswath Damodaran at Stern School of Business at NYU and wanted to share it with readers. I have long been a follower of his blog which goes through numerous musings on business valuation as well as worked examples, so would recommend his course and the blog. This is a great way to get started if you want to dip your toes in the water without reading all the books I recommend in my learn to invest section.
As “investors”, we like to think we have some inherent advantage over most people in the market, which is made up of traders and short term thinkers. We think of ourselves as the rational ones who keep a level head and objective approach even in the midst of fear and crisis. Books like the Intelligent Investor by Ben Graham, and gurus such as Warren Buffett make out like the market as a whole is irrational, disregards company fundamentals and can be taken advantage of. But there is an important point which is easy to miss among this self congratulatory rhetoric, and that is that Mr Market, far from being incompetent, is usually right. It is only on occasion that he is irrational and will offer you the proverbial $1 for 50 cents. In this article I’m going to explore what the ‘short interest’ in a stock tells you from the perspective of going long (i.e. it’s not about shorting stocks).
It’s hard to miss the carnage in oil stocks at the moment. I’m sure many, like me, are tempted to load up on them as oil reaches lows not seen since 2009. Surely this must be overdone, oil at $60 a barrel will not be sustained? Well that may be true, but the question I’m interested in is are fossil fuels going to prove to be a sensible investment long term?
‘Unburnable Carbon’ is a report by the Carbon Tracker Initiative. It raises an important issue at the moment, and that is if all the world’s fossil fuel companies extract and use all their proven reserves, the emissions will total 5 times the currently agreed limit by all major governments. There is a complete disconnect between the targets agreed by governments, and how the market is valuing fossil fuel reserves far in excess of those targets. In effect the market assumes the targets will be completely ignored.
In my last article on the ‘Best Investment for you’ I considered John Paulson’s advice for investors to buy a home. I focused a lot on how to value a house using rental yield to get an idea of whether or not you are overpaying for an asset. What I didn’t do was consider whether John Paulson’s advice was sensible or not and a lot of the discussion in the comments focused on house buying vs renting. So I’m going to rewind and address that question. The easiest way of doing this is to crunch the numbers – lucky for you I’ve tried to do as much of the hard work as possible and here is a model of buying vs renting costs with customizable inputs.
John Paulson gave an interview on CNBC in which he described the “best investment for a retail investor”. To some it may come as a surprise that this wasn’t some stock or bond, it was to buy a home (or primary residence).
For many this will represent a large investment, possibly larger than the whole of their equity investments put together. So why is John Paulson saying it is a good idea?
Well over a period of 20-30 years the chances of house prices being below where you buy are minimal due to inflation, but in the short term it can create financial pressure on you. I look at how you can assess house prices in the short term and estimate intrinsic value.
I like to think of myself as open-minded, I try to not to let my pre-existing biases get in the way of learning new things and new ideas. But I also like to think of myself as a skeptic – unless someone can show evidence or proof that an idea is correct, I’ll have a hard time accepting it.
So when it comes to Technical Analysis you can see why I am of two conflicting minds. Like most value investors, I have a tendency to dismiss TA and just focus on valuation, but after attending some friendly get togethers with other investors in London I discovered there are people out there that have been using TA to make money for decades – maybe there is something to this TA after all?
If you regularly search for undervalued companies then it probably hasn’t escaped your notice that the US and UK markets are trading at much higher valuations than they were a few years ago. That makes it harder to find bargains – but not impossible. But rather than try harder, why not start looking at cheaper markets? Here are 30 international markets and their valuations.
In the Blog Experiment article I went through the 2012 results of a portfolio that follows the buys and sells of my favorite bloggers. Here are the final results up to 30th June 2014.
I’ve always wondered whether I’m wasting my time when researching companies and if instead I should just blindly follow the recommendations of other bloggers I like. I decided to put the theory to the test in what I call the Blog Experiment, where I track the buys/sells of select blogs since 2012. Here are the preliminary results.
I follow quite a few blogs, it’s a great way to get ideas for investments without doing much work. I don’t usually follow bloggers into investments, it’s rare for me to be convinced of a thesis and all too often I find myself unable to get over some fundamental issue I have with the investment. But in the last couple of weeks I’ve seen an unusual number of ideas that I really liked. Firstly I thought I’d share my favorites with you.
I then started thinking, I follow a lot of blogs where the authors have impressive track records and I trust their judgement even if I don’t invest in everything they do. I wondered how I would perform if I skipped due diligence and just made investments in their recommended stocks, spread out over a few blogs to minimize the risk. So I thought I’d do a blog experiment.