The hottest Investment Substack posts right now

And their main takeaways
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Top Business Topics

The Bonfire of Venture Capital: The Good, Bad and Ugly Side of Cash Burn!

Musings on Markets • 0 implied HN points • 19 Aug 16
💼 Business Investment
  1. Cash burn isn't always a bad thing. It's common for startups to spend more cash than they earn while they focus on growth.
  2. There are risks with high cash burn, especially if a company cannot secure new funding. This can lead to serious financial trouble.
  3. Investors should look at the reasons behind cash burn. Understanding a company’s business model and management is key to deciding if cash burn is manageable.

The Ride Sharing Business: Is a Bar Mitzvah moment approaching?

Musings on Markets • 0 implied HN points • 17 Aug 16
💼 Business Investment
  1. Ride sharing is growing really fast and reaching more places than many thought possible. This rapid growth means that more people are using services like Uber and Lyft every day.
  2. Ride sharing is becoming global. What started in the U.S. is now popular in many countries, especially in Asia, where companies like Didi are leading the charge.
  3. The ride sharing market is changing a lot, with more options for users. Companies are trying new features like carpooling, pre-scheduled rides, and luxury options to attract different customers.

DCF Myth 3: You cannot do a valuation, when there is too much uncertainty!

Musings on Markets • 0 implied HN points • 02 May 16
💰 Finance Investment
  1. You can still do valuations even when there's a lot of uncertainty. It's actually common to face unknowns in investing.
  2. Uncertainty can lead to bad decision-making like inaction or relying too much on others' opinions. Being aware of how uncertainty affects you is key.
  3. Having a clear story or narrative about a company helps during uncertain times. It can guide your decisions and make valuations feel more grounded.

Valeant: Information Vacuums, Management Credibility and Investment Value

Musings on Markets • 0 implied HN points • 20 Apr 16
💰 Finance Investment
  1. Valeant experienced rapid growth by acquiring other companies and raising drug prices, which attracted many investors. However, this model was risky and heavily relied on debt.
  2. The company's troubles began when it faced scrutiny over its pricing strategies and financial practices, leading to a significant drop in stock value. Without financial transparency, investors became concerned about its future.
  3. Valeant's management credibility waned amid delays in financial reports and legal issues, making it clear that the previous business approach could not be sustained. Investors now have to tread carefully, as the company's future is uncertain.

Lazarus Rising or Icarus Falling? The GoPro and LinkedIn Question!

Musings on Markets • 0 implied HN points • 23 Feb 16
💼 Business Investment
  1. GoPro's stock has dropped significantly due to slower sales and increased competition. Investors are unsure if it can bounce back or if its best days are behind it.
  2. LinkedIn has seen different trends with more stability in revenue growth. It generates most of its income from subscriptions and matches, not just ads, which helps it stand out.
  3. Valuing companies like GoPro and LinkedIn involves considering their products and market positions. Both have unique challenges but show different paths for future success.
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January 2016 Data Update 7: Dividends, Potential Dividends and Cash Balances

Musings on Markets • 0 implied HN points • 27 Jan 16
💰 Finance Investment
  1. Dividends are an important part of investing, as they represent the cash that companies return to their shareholders. A company's ability to pay dividends often depends on its cash flow and investment opportunities.
  2. Many companies are now using stock buybacks, along with dividends, to return cash to shareholders. This trend has become popular globally, especially in the US.
  3. Companies' cash balances can show how dividend policies are affecting their financial health. Some companies might hold a lot of cash instead of paying dividends, which can lead to inefficiencies or missed opportunities.

The Compressed Tech Life Cycle: The Investor Challenge

Musings on Markets • 0 implied HN points • 21 Dec 15
💰 Finance Investment
  1. Tech companies often look expensive when they're young and cheap when they're old, which can confuse investors. It's important to use the right methods for valuing these companies, instead of using outdated approaches.
  2. Just because a tech company seems good today doesn't mean it will still be a good investment tomorrow. Investors should regularly re-evaluate their tech stocks and sell if they become overvalued.
  3. Dividends might not be the best way for tech companies to return cash to shareholders. Stock buybacks can be more suitable for their changing needs and financial situations.

Dream Big or Stay Focused? Lyft's Counter to Uber!

Musings on Markets • 0 implied HN points • 19 Oct 15
💼 Business Investment
  1. Lyft focuses on the US market, while Uber aims for global reach. This difference defines their business strategies and growth potential.
  2. Uber has a larger valuation compared to Lyft due to its big narrative, drawing investor attention and funding. Lyft, though smaller, may offer better investment value at its current price.
  3. Both companies face significant losses as they compete, but Lyft's focus could help it avoid the high costs and distractions associated with a broader global strategy.

On the Uber Rollercoaster: Narrative Tweaks, Twists and Turns!

Musings on Markets • 0 implied HN points • 12 Oct 15
💼 Business Investment
  1. Uber's market has grown bigger than just urban rides. It's now reaching suburbs and even international markets, showing strong growth in places like Asia.
  2. The competition in the ride-sharing industry is tough. Companies are investing a lot to attract drivers and create new offerings, which is pushing costs higher.
  3. Uber faces regulatory challenges and changing cost structures. This means their profits may be lower than expected, and they might have to adjust their business model in the future.

My Valuation Class: The Fall 2015 Model Preview

Musings on Markets • 0 implied HN points • 24 Aug 15
🚌 Education Investment
  1. Valuation is a skill, not just numbers or theory. It's like cooking or building things, where you get better by doing it rather than just studying the details.
  2. There's a big difference between valuing an asset and pricing it. Valuation looks deeper into the intrinsic value, while pricing is often about what the market will pay.
  3. You can value almost any asset, even if it seems tricky. By the end of a valuation class, you'll have the tools to value different types of assets confidently.

Valuing Country Risk: Pictures of Global Risk - Part II

Musings on Markets • 0 implied HN points • 29 Jul 15
💰 Finance Investment
  1. Investors need to adjust cash flows based on country risk, which means recognizing how risks in different countries can affect expected earnings and cash flows.
  2. An alternative way to deal with country risk is by increasing the required return on investments to reflect the higher risk, which also lowers the asset's value.
  3. It's important to avoid double counting risks when making adjustments and to ensure that any changes made for country risk are clear and understandable to others.

No Light at the end of the Tunnel: Investing in Bad Businesses

Musings on Markets • 0 implied HN points • 25 May 15
💼 Business Investment
  1. Businesses can be considered 'bad' if most companies in the industry regularly lose money. It's not enough for just a few companies to struggle; the whole sector needs to be underperforming.
  2. Companies might stick around in bad businesses because they hope things will improve or because it's hard to sell their assets at a good price. Sometimes, they also face pressure from other parties, like unions or governments.
  3. Investors might still invest in these bad businesses if the price is right. However, they need to be careful as putting money into struggling companies can turn out to be risky and often leads to more losses.

DCF Myth 1: If you have a D(discount rate) and a CF (cash flow), you have a DCF!

Musings on Markets • 0 implied HN points • 23 Feb 15
💰 Finance Investment
  1. You can't calculate a DCF just with a discount rate and cash flow. It needs to be done carefully, considering many factors for accurate results.
  2. It's important that everything in a DCF is consistent, like using the same currency and type of cash flows. If things don’t line up, the result won't make sense.
  3. A good DCF should tell a convincing story about the business’s future, matching numbers with real expectations and market conditions.

Blood in the Shark Tank: Pre-money, Post-money and Play-money Valuations

Musings on Markets • 0 implied HN points • 04 Feb 15
💰 Finance Investment
  1. Pre-money and post-money valuations are important in venture capital. They help determine how much a business is worth before and after an investment.
  2. The ownership share an investor gets depends on the business's value and their bargaining power. A strong entrepreneur might keep more ownership if capital is easy to find.
  3. Pricing a business can be tricky and unclear. It's better to be transparent about how ownership rights are assessed to avoid confusion and ensure fairness.

Putting the D in the DCF: The Cost of Capital

Musings on Markets • 0 implied HN points • 19 Jan 15
💰 Finance Investment
  1. The cost of capital is really important in finance and there are three main ways to understand it: as a cost of raising money, as an opportunity cost, and as a discount rate for valuing businesses.
  2. When figuring out a company's cost of capital, you need to look at the risk of the business, the debt it has, and how much investors expect to earn. It’s a detailed process but crucial for making good financial decisions.
  3. It's easy to get caught up in small details about the cost of capital, but what's more important is to focus on the actual cash flows of the business. Getting those numbers right can make a bigger impact.

"If you build it (revenues), they (profits) will come": Amazon's Field of Dreams!

Musings on Markets • 0 implied HN points • 30 Oct 14
💼 Business Investment
  1. Amazon has been focusing on building revenue first, hoping profits will follow later. This strategy means they often sell things at a loss to gain customer loyalty.
  2. Despite having high revenues, Amazon struggles with profitability. Their costs for things like shipping can exceed the money they make from those services.
  3. Investors need to be cautious since high revenue growth may not guarantee strong profits. High operating margins are essential for real value in the long run.

Corporate Breakups: Value and Pricing Effects

Musings on Markets • 0 implied HN points • 24 Oct 14
💼 Business Investment
  1. Breaking up a company can have different effects on its cash flows, growth potential, and risks. When parts of a company operate separately, they might become more efficient and reduce costs.
  2. The value of a break up depends on whether the separate units can achieve outcomes that weren’t possible when they were combined. If a company can't lower costs or improve operations within the consolidated structure, a break up might be needed.
  3. Market pricing can change after a break up. Investors might value the separate parts differently compared to the consolidated whole, which can lead to mispricings and affect how the market perceives the company.

Reacting to Earnings Reports: Narrative Adjustments and Value Effects

Musings on Markets • 0 implied HN points • 06 Aug 14
💼 Business Investment
  1. Earnings reports are crucial for understanding a company's performance and future plans. They can change how investors view a company, making it important to pay attention to the details.
  2. There are three types of narrative effects from earnings reports: breaks, shifts, and changes. Each can significantly affect a company's value and how it should be valued in the market.
  3. It's essential to stay flexible and adjust valuations as new information comes in from earnings reports. Reacting quickly to unexpected changes can help make better investment decisions.

Investment Advice from the Federal Reserve: Unusual, unwise and unseemly!

Musings on Markets • 0 implied HN points • 26 Jul 14
💰 Finance Investment
  1. The Federal Reserve's recent comments on specific sectors like social media and biotechnology could confuse investors. It's unusual for them to give such specific investment advice since they're not experts in company valuations.
  2. Investors often misjudge the potential of high-growth sectors, leading to inflated valuations. It's essential to remember that picking winners in these markets can still yield excellent results, even if the overall sector is overpriced.
  3. The Fed should act more like an umpire in the financial markets and let investors make their choices. Treating investors as adults means they must face the consequences of their investment decisions without expecting constant guidance from the Fed.

Incremental News, Price and Value: The Twitter Earnings Report & Market Reaction!

Musings on Markets • 0 implied HN points • 11 Feb 14
💰 Finance Investment
  1. Twitter's revenue grew really fast, over 100% in a year, which is great news for the company. This means they are making more money and reaching more people.
  2. Despite the revenue growth, Twitter struggled with user growth and engagement. They had to work harder to attract new users, which can be a concern for the company's future.
  3. The market reacted sharply to Twitter's earnings report, which shows how unpredictable stock prices can be. Sometimes, even small news can lead to big fluctuations in a company's value.

Value in the eye of the storm: Why you should welcome uncertainty!

Musings on Markets • 0 implied HN points • 19 Nov 13
💰 Finance Investment
  1. Valuing companies during uncertain times can actually give you an edge over others. When everyone else is scared, you can find opportunities others might miss.
  2. If you wait for all the uncertainties to clear up before making your investment decisions, you might lose out. Act when things are messy, as your insights are most valuable then.
  3. If many investors are saying something can't be valued, that's when you should jump in and try. There might be hidden potential in areas others overlook.

Valuing Athlete Earning Potential? Tracking Arian Foster!

Musings on Markets • 0 implied HN points • 22 Oct 13
💼 Business Investment
  1. Investors can buy shares in an athlete's future earnings, like Arian Foster's, but they face a lot of risks. Injuries or poor performance can greatly affect how much money an athlete makes.
  2. Companies like Fantex manage these investments and take a cut of the earnings for expenses, meaning investors depend on dividends, which aren't guaranteed. The value of the shares can drop if the athlete doesn't perform well or gets injured.
  3. This type of investment is new and speculative, which means investors should be careful. The market for these shares is not well established yet, making it hard to sell them if you need to.

A tangled web of values: Enterprise value, Firm Value and Market Cap

Musings on Markets • 0 implied HN points • 29 Jun 13
💰 Finance Investment
  1. Different types of value, like market cap and enterprise value, can give you different views of a company's worth. Investors should know which measure makes more sense for their situation.
  2. Measuring value isn't straightforward because you might need to consider things like non-traded shares and off-balance sheet debts. Mistakes in these measurements can lead to the wrong conclusions about a company's value.
  3. The best value measure can change based on what you're trying to figure out; different situations, like buying a company or investing in stocks, might call for different approaches to valuing a company.

Acquisition Advice: Big deal or good deal?

Musings on Markets • 0 implied HN points • 05 Dec 12
💼 Business Investment
  1. Investment bankers often have conflicting roles when advising on mergers and acquisitions. They might benefit more from just completing deals rather than giving the best advice, leading to poor outcomes.
  2. Meticulous vetting of deals is essential, especially big ones. Bigger deals tend to get less effective advice, which can be harmful to the companies involved.
  3. The way bankers are paid needs to change. If their fees were tied to the success of the deals over time, they might give better advice and help their clients avoid bad acquisitions.

The Yankees' A Rod Problem: Sunk costs and investing

Musings on Markets • 0 implied HN points • 27 Oct 12
💼 Business Investment
  1. Sunk costs shouldn't affect current decisions. If you've already spent money, it shouldn't make you invest more if it's no longer worth it.
  2. Investors tend to hold on to losing stocks longer than they should. This can cause frustration and loss of potential gains.
  3. Regularly reviewing your investments can help you avoid emotional decision-making. Treating your portfolio like a new investment each year can keep it healthy.

Private Equity: Too disruptive or not disruptive enough?

Musings on Markets • 0 implied HN points • 18 Oct 12
💼 Business Investment
  1. Private equity (PE) can help fix poorly managed and undervalued companies. PE investors target these firms to improve their performance and governance.
  2. The performance of PE investors varies a lot; while some do very well, others do poorly. This means that not all PE firms are equally successful in generating returns.
  3. Critics of PE argue that it can lead to job losses, but the evidence is mixed. While jobs at targeted firms may drop, new jobs can also emerge in other businesses they invest in.

How much is growth worth?

Musings on Markets • 0 implied HN points • 29 May 12
💼 Business Investment
  1. Growth can be valuable, but it often means you need to reinvest your profits back into the business. This can lead to less cash now, but more cash in the future.
  2. The potential value of growth depends on three main factors: how much you grow, how long you can keep growing, and how much profit you can make on new investments.
  3. Not all growth is good. Sometimes, if growth costs more than it earns, it can actually reduce the overall value of a business.

How much are you paying for growth?

Musings on Markets • 0 implied HN points • 29 May 12
💰 Finance Investment
  1. There are different views on how much growth in a company is worth. Some think it's not worth much, while others believe it's priceless.
  2. To understand the value of growth, you look at what a company is earning now versus what it could earn in the future if it reinvests its profits.
  3. By comparing a company's market value to the value of its current assets, you can see how much of its price is based on expected future growth.

Governments and Value II: Subsidies and Value

Musings on Markets • 0 implied HN points • 26 Apr 12
💼 Business Investment
  1. Governments can help certain companies by providing subsidies, which can lower their financing costs and increase their overall value. These subsidies might come as below-market loans or tax breaks.
  2. There are different types of subsidies, including low-cost financing, tax benefits, price supports, and indirect subsidies. Each of these can positively affect a company's cash flows and valuation.
  3. When valuing a company, you can include these subsidies in your calculations or evaluate them separately. Understanding how long the subsidies may last is important for accurate valuation.

Equity Risk Premiums: The 2012 Edition

Musings on Markets • 0 implied HN points • 23 Mar 12
💰 Finance Investment
  1. The equity risk premium is the extra return investors expect from stocks compared to safer investments. It shows how investors feel about risk and potential returns.
  2. Different methods exist to measure the equity risk premium, including surveys, historical data, and implied premiums. Each method can give different results, but future predictions are key.
  3. When valuing stocks or deciding on investment allocations, using the current implied equity risk premium is generally best. This keeps valuations grounded in today's market situation.

Living within your limits: Thoughts on Research In Motion (RIM)

Musings on Markets • 0 implied HN points • 16 Dec 11
💼 Business Investment
  1. Companies, like people, face limits as they age. They need to recognize these limits to maintain their value.
  2. RIM has two main choices: invest in growth or focus on maintaining cash flow from their existing products. Both paths have risks and rewards.
  3. It's important for companies to adapt to their current state. RIM should accept its limitations and cater to its core market rather than chasing after outdated ambitions.

Are you ready to value Groupon?

Musings on Markets • 0 implied HN points • 02 Nov 11
💼 Business Investment
  1. Groupon's initial estimated value dropped from $20 billion to around $12 billion due to management's credibility issues and concerns over customer acquisition costs. This shows how important a company's reputation is in the market.
  2. The company's revenue saw a huge rise of over 300% from 2010 to 2011, but sustaining that growth will be a challenge. It's crucial to be careful when predicting future growth for businesses.
  3. The valuation suggests that investing in Groupon is also a bet on the economy as it can profit from tough economic times. This makes it a unique business model that depends on different economic conditions.

Growth (Part 4): Growth and Management Credibility

Musings on Markets • 0 implied HN points • 28 Oct 11
💼 Business Investment
  1. Growth companies depend heavily on management's ability to have a clear vision and a solid plan to achieve it. Without the right strategy, even a great product may fail to capture the market.
  2. Trustworthiness is key in young companies. Good managers share both good and bad news with investors, which helps build credibility and a strong relationship.
  3. Investors should pay attention to how much input they can have in a company's decisions. If management avoids giving them a voice, it could be a red flag about their willingness to collaborate.

Class is in session...

Musings on Markets • 0 implied HN points • 07 Sep 11
🚌 Education Investment
  1. The class is focused on learning how to value different types of businesses using various methods, like discounted cash flow and relative valuation.
  2. You don't need to be a student at NYU to join in; anyone can watch lectures and access resources online.
  3. The instructor encourages participation and offers tools like quizzes and projects to help everyone understand business valuation better.

Chill, dude! It is not the ratings downgrade.. It is how you react to it!

Musings on Markets • 0 implied HN points • 06 Aug 11
💰 Finance Investment
  1. A ratings downgrade doesn't bring new information; it's usually something people already knew. Instead of panicking, it's best to recognize the downgrade as confirmation of existing issues.
  2. Ratings agencies measure risk but don’t provide real solutions. It's important to remember they are not decision-makers, and relying on them could hurt long-term planning.
  3. The downgrade can actually offer a chance to focus on better decision-making. Instead of being fixated on maintaining ratings, leaders can prioritize effective policies that improve the economy.

From revenues to earnings: Operating, financing and capital expenses....

Musings on Markets • 0 implied HN points • 15 Jun 11
💼 Business Investment
  1. Groupon reported high revenues but also significant operating losses, raising questions about their accounting practices. It's important to understand how companies measure their profits and expenses.
  2. Groupon claimed it would be profitable by using 'Adjusted CSOI,' which excludes customer acquisition costs. This approach may mislead investors about the company's true profitability.
  3. Reclassifying expenses can make a company's earnings look better, but it can also hide the real costs involved in growth. Evaluating a company's return on investment is key to understanding its value.

Dual share structure: The Google model spreads

Musings on Markets • 0 implied HN points • 20 May 11
💼 Business Investment
  1. Google introduced a new way for companies to go public by using a dual share structure, allowing founders to keep more control through shares with extra voting rights.
  2. Voting rights are important because they let shareholders influence company decisions. However, many investors often overlook these rights if they believe the company is well-managed.
  3. Valuing stocks with different voting rights can be tricky. Usually, voting shares are worth more, especially in companies that aren't managed well.

Valuing young growth companies: A postscript on Linkedin

Musings on Markets • 0 implied HN points • 19 May 11
💼 Business Investment
  1. Young growth companies can have different stages and potential. For example, LinkedIn was growing its revenue much faster than Skype at a similar time.
  2. Profitability is an important aspect to consider. LinkedIn was already making money, while Skype was still losing money.
  3. Market size matters when valuing a company. LinkedIn had a smaller market potential compared to Skype, which could compete in a larger telecom market.

The Little Book of Valuation

Musings on Markets • 0 implied HN points • 03 May 11
💰 Finance Investment
  1. Valuation can seem complicated, but it's actually quite simple. The goal is to empower investors to learn how to value different types of companies themselves.
  2. Understanding the key factors that drive a company's value is crucial. Identifying these value drivers helps investors create better investment strategies.
  3. The book is designed to be accessible and easy to read, focusing on practical tools rather than overwhelming details. It aims to make valuation understandable for all investors.

Alternatives to the CAPM: Wrapping up

Musings on Markets • 0 implied HN points • 30 Apr 11
💰 Finance Investment
  1. Ignoring risk in investments is a big mistake. You need your own way to measure and manage risk because investments have different levels of risk.
  2. Using numbers is important for valuing companies, but don't forget the stories behind them. The results in numbers should reflect the company's real situation.
  3. Keep your methods simple. A straightforward approach, like CAPM, can be useful, and it's important to question and refine your risk assessment regularly.