Nuggets of Investing Wisdom

Nuggets of Investing Wisdom

A website for serious investors in common stocks

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Discounted Cash Flow

The Equity Risk Premium and what to use it for

  • by Rodney Smith
  • Posted on August 21, 2022August 21, 2022
  • Part 7: Building and Managing a Portfolio

On this basis it could be argued that, at that time, since expected returns were well below historic norms, prices were too high.

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CAPE’s halo falls with a thud

  • by Rodney Smith
  • Posted on January 23, 2022January 23, 2022
  • Part 5: Asset Management

CAPE is ignorant of interest rates

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Heart of stock valuation: subtleties of free cash flow

  • by Rodney Smith
  • Posted on January 24, 2021January 24, 2021
  • Part 7: Building and Managing a Portfolio

If a company’s capital expenditures are simply maintaining the company’s position in its markets, it free cash flow may be unduly high

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The problem with analysts’ target prices

  • by Rodney Smith
  • Posted on January 17, 2021January 21, 2021
  • Part 7: Building and Managing a Portfolio

The sell side analyst’s target prices do not estimate fair value. DCF estimates do just that. Investors should not confuse the two.

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Stock valuation in an age of intangible assets

  • by Rodney Smith
  • Posted on November 29, 2020December 1, 2020
  • Part 7: Building and Managing a Portfolio

About forty years ago Buffett experienced a Damascene conversion

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How Warren Buffett goes about valuing companies

  • by Rodney Smith
  • Posted on June 8, 2020January 15, 2021
  • Part 7: Building and Managing a Portfolio

We are going to want to get a significantly higher return, obviously — in terms of cash produced relative to the amount we’re outlaying now — for a business than we are from a government bond. That has to be the yardstick at a base.

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The dangers and benefits of using Discounted Cash Flow analysis reports

  • by Rodney Smith
  • Posted on May 31, 2020November 29, 2020
  • Part 7: Building and Managing a Portfolio

Opinions of fair value based on DCF calculations are necessarily inexact (rightly vague?). But, at least they at least ask the right question.

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Problems with CAPE – Part l

  • by Rodney Smith
  • Posted on April 19, 2020January 17, 2021
  • Part 5: Asset Management

A CAPE ratio of 26.91 does not prove the stock market is overpriced. The stock market today may be overpriced or underpriced. CAPE using a historic average as a benchmark just doesn’t tell us one way or another

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