Value Investing Don't Get Hypnotized By Falling Stock Prices |
- Don't Get Hypnotized By Falling Stock Prices
- Valuation: Pre-Money DCF vs Post-Money DCF
- Seth Klarman: Hard Choices
- 2018 year end portfolio review
| Don't Get Hypnotized By Falling Stock Prices Posted: 01 Jan 2019 07:32 PM PST Last week I told my wife that I was planning on buying a stock after the previous week's sell-off. She asked: "But how can you be sure that the price won't keep going lower? Haven't stocks been falling non-stop lately?" I can't be sure. It's easy to get mesmerized by staring at the computer and watching falling prices. To get hypnotized into inaction as fear of loss kicks in. Your mind tells you: "It fell X%. It's going to keep falling. Just wait a little longer." I went through this in the first downturn that I invested in as a professional value investor, in 2001-2002. I kept watching the screens. I didn't act. My process has evolved significantly over the years, informed by that market downturn, as well as the far greater one in 2008-2009. I now have a rigorous, written process that I have shared with all my investors in the Owner's Manual. It serves both as a guideline to remind me what I should do when under behavioral pressure, and to tie me to the mast of my best-reasoned logic to avoid the siren-song of fear and greed calling to me to act irrationally. I made the decision last night, after calmly re-analyzing the business, stress-testing the fundamentals and considering various alternatives. That morning I bought the stock. I do not know what the price will do in the short-term. I believe, based upon sound reasoning and analysis, that the value greatly exceeds the price and that the downside to the worst-case fundamental scenario is low. That is the best one can do. As Benjamin Graham put it: "In the short-term the market is a voting machine, but in the long-term it is a weighing machine." Happy Holidays to you and your families, and a prosperous New Year! [link] [comments]  |
| Valuation: Pre-Money DCF vs Post-Money DCF Posted: 01 Jan 2019 11:04 AM PST Hypothetical scenario: Valuing a private company that's looking to raise equity financing for future Cap Ex. Valuation (pre vs post money): While conducting a DCF (for simplicity let's assume it's a profitable company that's been around for 7+ years) do I assume all future plans of the company - i.e. has raised the financing, spending it on cap ex and realizing gains from that cap ex OR do I project out without those 'post-money' assumptions? So I basically have two sets of assumptions
Hope the question's sort of clear. Thanks in advance. [link] [comments]  |
| Posted: 01 Jan 2019 06:46 PM PST An insightful recent speech by Seth Klarman. "Fads can be mistaken for trends; the flavor du jour can masquerade as a time-tested recipe. An ephemeral stock price can be made to seem a permanent achievement, an unwavering final verdict. The temporary opinion rendered by the market can be easily confused with actual business success." https://www.alumni.hbs.edu/stories/Pages/story-bulletin.aspx?num=6818 [link] [comments]  |
| 2018 year end portfolio review Posted: 01 Jan 2019 06:11 PM PST |
| You are subscribed to email updates from Value Investing. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States | |
No comments:
Post a Comment