Value Investing Stop obsessing over WACC! |
- Stop obsessing over WACC!
- Is Warren Buffett Sending a Signal About the Bond Market?
- High margin cloud business soon a commodity? [Discussion]
- To what extent do you think Alphabet's buyback represents a change of outlook towards their investors?
- JP Morgan Health Conference - How useful is it to attend for someone interested in biotech investing?
- FPA - Risk is Where You're Not Looking
| Posted: 06 Jan 2019 12:41 AM PST No one in the industry bothers to use wacc. DCFs are foundational, but so many people on this sub think wacc is a crucial component. Not true. This is wrong. So many investors conflate volatility with risk. The idea behind wacc stems from the theory behind Capm where everything is couched in terms of expected return and random walk variance. Companies do not work this way! Risk is not volatility. Risk is permanent capital loss— the probability and the magnitude. When you discount, you consider the risk to the cash flows and ask yourself, what is the rate of return I would require to own this company? So if it's a stable industrial company with a deep moat and cash flows that probably won't change, try 10-15%. If it's a fallen angel, try 25%. Underwrite your thesis with a required IRR; THAT should be your discount rate. Use some common sense. If a company is 10x D/Ebitda and a moonshot venture, don't use 10%! No matter what your bs wacc inputs say! Be value investors. Gives Graham another read and focus on what's important! [link] [comments]  |
| Is Warren Buffett Sending a Signal About the Bond Market? Posted: 05 Jan 2019 03:57 PM PST |
| High margin cloud business soon a commodity? [Discussion] Posted: 05 Jan 2019 01:25 PM PST In a recent interview Stan Druckenmiller stated that he's betting big on cloud companies like Salesforce, Workday and Service Now. He likens the current cloud expansion with the growth of mobile in the last decade. Currently Amazon, Microsoft and Alphabet are the leaders in this business. Meanwhile many other competitors like Oracle, Salesforce, Workday and ServiceNow are all battling for market share. With all these players (and more) will the margins inevitably come down over time? Do any of the above mentioned companies have any moats as cloud providers? I was thinking about it when I was taking a closer look at Microsoft. Their cloud business currently makes up a significant part of their revenue growth and delivers high margins. While I can see how their software business (Microsoft OS and Office Software) can sustain high ROIC over time, due to high market share, network effects and high switching cost for enterprises, I don't see how the cloud business will be able to sustain the high margins in view of all the competitors in the field. Are there any significant competitive advantages any one company has in this space or are they all providing an indistinguishable product that solely competes on price? [link] [comments]  |
| Posted: 05 Jan 2019 10:25 AM PST I think it's fair to say that Google has historically had a complete disregard for their investors. They announced a buy back at the beginning of last year that amounted to, approximately, 10% of cash reserves, 1% of market cap or 1x free cash flow. By all standards, a very modest return to the investor. I know that 1) this is old news 2) this is probably a highly speculative discussion, but I think it's worth at least discussing if there is any more recent attitude shift towards investors from Google, if at all. [link] [comments]  |
| Posted: 05 Jan 2019 07:04 PM PST I invest in smaller biotech companies for now for fun. I work in the healthcare field but I am wondering if I should attend the conference. Thanks! [link] [comments]  |
| FPA - Risk is Where You're Not Looking Posted: 05 Jan 2019 11:23 AM PST |
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