Learning Valuation

I finally decided to get serious. After years of nibbling around the edges, I guess it was time to step up and take a big bite.

This summer bought Aswath Damodaran’s “The Little Book of Valuation” with the intent of reading it cover to cover in a month.

I bloody devoured it in one intense week!

While the book barely earns a 4-star on Amazon, the author is no stranger to me. I’ve been reading his blog, and following his lectures on valuation in fits and starts for the past few years.

I have a rough idea of how he thinks about things. There are many things about his intellectual posture that I really dig. For example:

  • all valuations are wrong, but some are useful
  • any business, regardless of where it is in its life cycle, can potentially be valued
  • don’t run away from uncertainty, try to quantify it in different ways
  • a bias towards intrinsic valuation, not because it is more accurate, but because it forces you to explicitly specify your assumptions.
  • the importance of overlaying a narrative on the numbers.

Numbers without narrative = Modeling, Narrative without numbers = Storytelling, Numbers + Narrative= Investing

Over the next few months, I am going to try to practice some lessons I learned from his book on companies that have somehow sneaked into my portfolio.

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