A rather interesting discussion by NYU professor Aswath Damodaran on Valuation. Yeah, yeah – I know…Another value investing guy who talks about intrinsic value and discounted cash flows, but the conversation brings up some interesting ideas:
- Are valuations completed by sell side analysts (analysts at institutions selling you something), or perhaps some buy side institutions as well, actually masking simplicity with seeming complexity by placing a multiple on price (As noted, think about how Real Estate Agents come up with the “Price” of a property)?
- If something has no future cash flow, can it be valued? More importantly, does it even have value?
- Which do you wish to play; the long run value game or the short run price game?
- Uncertainty exists, don’t shy away from accepting this and estimate…Does finding the distribution of outcomes yield the answer, relative to the percentile the “Price” sits currently?
- Number Crunches vs. Storytellers, should it be one or the other? Why not fuse the two?
- Luck vs. Skill (I will add some posts by Michael Mauboussin in this topic soon), why do investors seemingly pay so much for luck (i.e. Hedge Funds)?