The hottest Valuation Substack posts right now

And their main takeaways
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Top Business Topics

Marking Time: A new year, a fresh semester and its class time!

Musings on Markets • 0 implied HN points • 12 Jan 21
🚌 Education Corporate Finance Valuation Investment Strategies Teaching Methods
  1. Teaching is all about having a clear story throughout the course. Each class connects through a central theme that helps students remember what they learned.
  2. Corporate finance is super important because it relates to any decision involving money. Knowing how to run a business means understanding corporate finance.
  3. Investment philosophies show that there isn't just one way to be a successful investor. Different strategies work for different people, and trying to copy famous investors often doesn't lead to the same level of success.

Illusion, Perception and Reality: Stock Splits and Index Inclusions

Musings on Markets • 0 implied HN points • 01 Sep 20
💰 Finance Stock Market Investing Valuation Market Trends Behavioral Finance
  1. Stock splits and index inclusions may seem unimportant, but they impact market behavior. They can cause prices to move even without changes in a company's real value.
  2. Value events, gap events, and pricing events are all different types of stock market occurrences. Each type changes prices in different ways, whether by affecting value, closing price gaps, or changing investor sentiment.
  3. Traders often react to stock splits and index changes to capitalize on market momentum. However, long-term investors should focus on fundamentals instead of getting swayed by these temporary market changes.

Data Update 6 for 2020: Profitability, Returns and the value of Growth

Musings on Markets • 0 implied HN points • 21 Mar 20
💰 Finance Investment Valuation Profitability Growth Returns
  1. Good businesses can make profits and turn those profits into cash flow for investors. It's important to think about both profit and cash flow, especially during tough economic times.
  2. Growth, profitability, and reinvestment are crucial to a company's value. Companies that grow their revenue while managing costs effectively are usually the most successful.
  3. How well a company reinvests can affect its growth and profitability. Efficient reinvestment means more gains and better overall performance in the market.

An Ode to Luck: Revisiting my Tesla Valuation

Musings on Markets • 0 implied HN points • 30 Jan 20
💰 Finance Investing Stock Market Valuation Risk management Company analysis
  1. Investing in Tesla brings mixed feelings. Some people believe in its huge potential, while others think it's too risky and overpriced.
  2. Luck played a big role in when to buy or sell Tesla stocks. It's important to recognize the difference between lucky timing and real investment skill.
  3. The future of Tesla depends on its ability to grow and make profits. Investors need to consider how well Tesla can compete in the busy car market.

Regime Change and Value: A Follow up Post on Aramco

Musings on Markets • 0 implied HN points • 19 Nov 19
💰 Finance Valuation Risk Analysis Business valuation Investment strategy
  1. Valuing a company like Aramco requires looking at both its expected cash flows and political stability. Changes in government can hugely impact its value.
  2. Risk is an important factor in investments and can be split into 'going concern' risk, which means worrying about future cash flows, and 'truncation' risk, which means worrying about whether the company will still exist in the future.
  3. There are pros and cons to investing in businesses within democracies versus autocracies. Democracies can lead to more stable cash flows but also introduce more frequent changes, while autocracies can appear stable but may lead to sudden and drastic changes.
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The Softbank-WeWork End Game: Savior Economics or Sunk Cost Problem?

Musings on Markets • 0 implied HN points • 15 Nov 19
💼 Business Investing Economics Corporate Governance Financial Analysis Valuation
  1. Softbank invested heavily in WeWork after a failed IPO, raising questions about whether they were rescuing a sinking ship or throwing good money after bad. Their decision highlights how past investments can warp future choices.
  2. Fair value accounting can give misleading pictures of a company's worth because it’s based on market prices rather than real value. This can lead companies to make poor decisions just to improve their accounting numbers.
  3. Investing isn't just about being smart; it's also about being humble. Investors who acknowledge their mistakes and learn from them tend to make better decisions, unlike those who get arrogant after a few wins.

Meatless Future or Vegan Delusions? The Beyond Meat Valuation

Musings on Markets • 0 implied HN points • 12 Jun 19
💼 Business Food Industry Market Trends Investment Consumer behavior Valuation
  1. Beyond Meat is leading the plant-based meat market, but competition from companies like Impossible Foods is growing. Both companies are focusing on taste and texture to attract meat-eaters looking for alternatives.
  2. Health concerns, environmental impact, and improved taste are pushing more people to try meatless options. These trends are likely to strengthen, leading to more growth in the meatless products industry.
  3. The meatless meat market is still relatively small compared to traditional meat. While it has potential for growth, it may take time to reach a significant share of the overall meat market.

Uber's Coming out Party: Personal Mobility Pioneer or Car Service on Steroids?

Musings on Markets • 0 implied HN points • 15 Apr 19
💼 Business Startups Valuation Market Analysis Transportation Financial Reporting
  1. Uber is more than just a ride-sharing service; it sees itself as a personal mobility business, aiming to tap into a huge market worth potentially $2 trillion.
  2. Despite growing rider numbers and revenues, Uber struggles with profitability, continuously facing high costs and losses, making its financial future uncertain.
  3. Uber's ability to convince riders to use its services more often, rather than just acquiring new users, will be key to its success and overall company value.

Lyft Off? The First Ride Sharing IPO!

Musings on Markets • 0 implied HN points • 08 Mar 19
💼 Business Startups Finance Investment Markets Valuation
  1. Lyft was the first ride-sharing company to go public, which could impact the future IPOs of competitors like Uber and Didi. This means how investors react to Lyft will set the stage for others.
  2. Ride-sharing has significantly changed how people use transportation, leading to a big drop in traditional taxi revenues. Companies in this space have seen rapid growth, but they also face challenges with profitability.
  3. Lyft's focus on the US market and its transportation services offers it a clear strategy. However, the company still struggles to make profits, which is an ongoing concern for investors.

January 2019 Data Update 9: The Pricing Game

Musings on Markets • 0 implied HN points • 22 Feb 19
💰 Finance Investing Market Analysis Corporate behavior Valuation Risk management
  1. The price of a stock can often differ from its true value. Factors like demand, supply, and investor feelings can affect pricing.
  2. When comparing companies, it's important to look at their pricing in relation to the market, rather than relying on absolute rules or ratios.
  3. Fundamentals often influence stock prices, meaning strong or weak performance factors can help explain why some stocks appear cheap or expensive.

January 2019 Data Update 6: Profitability and Value Creation!

Musings on Markets • 0 implied HN points • 27 Jan 19
💼 Business Finance Management Investing Valuation Corporate Governance
  1. The lowest standard for a business's success is just making money, but that's not enough to ensure long-term survival. Companies need a clear path to profitability to stay in business.
  2. It's important to compare profits relative to the size of a company to get a clearer picture of its financial health. Looking at profit margins helps us see how well a business performs against its competitors.
  3. Creating value goes beyond just making profits; companies should earn more than what could be made by investing capital elsewhere. Many companies struggle to meet this higher standard, making value creation challenging.

Amazon and Apple at a Trillion $: A Follow-up on Uncertainty and Catalysts!

Musings on Markets • 0 implied HN points • 21 Sep 18
💰 Finance Investment Valuation Economics Risk management Market Analysis
  1. Uncertainty is a big part of valuing companies. Instead of ignoring it, we can use tools like scenario analysis and simulations to make better predictions.
  2. When valuing companies like Apple and Amazon, using more than just single numbers helps us understand how different factors can change the outcome.
  3. Look for events or news (like earnings reports or management changes) that can change a company's stock price. These can be key moments for making investment decisions.

Apple and Amazon at a Trillion $: Looking Back and Looking Forward!

Musings on Markets • 0 implied HN points • 19 Sep 18
💼 Business Companies Finance Investing Market Analysis Valuation
  1. Apple and Amazon both faced tough times on their way to becoming trillion-dollar companies. They dealt with challenges and used those experiences to grow stronger.
  2. Apple's success mainly comes from the iPhone, but it's now a mature company with slower growth. In contrast, Amazon continues to aim for high growth, even if it means waiting for profits.
  3. Apple generates lots of cash flow and returns it to shareholders, while Amazon focuses on reinvesting for growth. This difference shapes how investors see and value each company.

User and Subscriber Businesses: The Good, the Bad and the Ugly!

Musings on Markets • 0 implied HN points • 29 May 18
💼 Business Valuation Investing Finance Economics Startups
  1. User-based businesses can be valuable, but not all users create value. It's important to understand which user bases are real assets and which are just liabilities.
  2. The way a company manages costs, especially between servicing existing users and acquiring new ones, can indicate its long-term success. Spending on new users is usually seen as a better investment than spending too much on current users.
  3. Not all user-focused companies are well-run. If a company's strategy is only about getting users without a solid plan to make money, that's a red flag for investors.

Amazon: Glimpses of Shoeless Joe?

Musings on Markets • 0 implied HN points • 26 Apr 18
💼 Business E-commerce Valuation Investment Market Analysis Corporate strategy
  1. Amazon is very successful because it uses a patient approach, focusing on long-term growth instead of immediate profits. This lets them continue expanding into new markets.
  2. The company's strategy includes experimenting and trying new things to stay ahead, which helps it disrupt existing businesses and keep competitors on their toes.
  3. Amazon's success shows that strong cash flow and managing expenses wisely are key. They invest in technology and services that boost future growth, even if it means lower profits today.

Alphabet Soup: Google is Alpha, but where are the Bets?

Musings on Markets • 0 implied HN points • 19 Apr 18
💼 Business Valuation Investing Market Trends Corporate strategy Digital Advertising
  1. Google's main strength comes from its ability to grow revenue while keeping good profit margins. This has helped the company stay strong in the advertising market.
  2. The digital advertising space is mostly controlled by Google and Facebook, leading to a two-company competition. Google's reach and data collection make it a major player, especially in services like YouTube and Gmail.
  3. Alphabet's other business ventures are still developing. While some see them as risky investments, they may offer future growth opportunities if they succeed.

Netflix: The Future of Entertainment or House of Cards?

Musings on Markets • 0 implied HN points • 16 Apr 18
💼 Business Investing Valuation Market Trends Entertainment
  1. Netflix has really changed how we watch TV and movies. It's now a big player not just in entertainment, but also in how other companies make content.
  2. The company spends a lot on creating original content to keep its subscribers happy. This helps it avoid rising costs from other content providers and makes viewers want to stick around.
  3. Netflix is focusing more on global subscribers, especially in Asia. This means they're not just staying local but trying to reach viewers all over the world.

Spotify Loose Ends: Pricing, User Value and Big Data!

Musings on Markets • 0 implied HN points • 23 Mar 18
💼 Business Finance Valuation Market Analysis Data Strategy Subscriber growth
  1. Spotify's value can be tricky to figure out. It's often based on comparisons to companies like Pandora and Netflix, which can lead to different opinions on how much Spotify is really worth.
  2. The worth of Spotify's subscribers is important for its overall value. By looking at how much revenue each subscriber brings in, the company can estimate its long-term potential.
  3. Data collection is a big part of Spotify's business. While having access to user preferences can be valuable, it may not always lead to higher worth due to competition and privacy concerns.

Stream On: An IPO Valuation of Spotify!

Musings on Markets • 0 implied HN points • 17 Mar 18
💼 Business Finance Market Analysis IPO Valuation Music Industry
  1. Spotify has experienced rapid growth, significantly increasing its user base and revenues in recent years. This growth is crucial as it shows the company's potential in the competitive music streaming industry.
  2. A large portion of Spotify's revenue comes from premium subscriptions rather than ad revenue, highlighting the importance of getting users to pay for better experiences.
  3. The company's content costs are declining as a percentage of revenue, which could help improve profit margins, but there is ongoing tension between keeping music labels and artists satisfied while managing costs.

January 2018 Data Update 10: The Price is Right!

Musings on Markets • 0 implied HN points • 06 Feb 18
💰 Finance Investment Valuation Market Analysis Financial Metrics Corporate Finance
  1. Value and price are not the same. Understanding this helps investors make better decisions since market behavior can reward actions that don't create real value.
  2. Pricing an asset involves finding similar traded assets, choosing a good pricing metric, and scaling correctly. These steps are important for accurate valuations.
  3. Investors should be aware of the global differences in pricing multiples, like PE ratios and book value ratios, as they indicate how markets value companies in different regions.

January 2018 Data Update 6: A Cost of Capital Primer

Musings on Markets • 0 implied HN points • 26 Jan 18
💰 Finance Investments Corporate Finance Valuation Risk management Capital Structure
  1. The cost of capital is a critical concept in finance, representing the return an investor requires from a business investment. It's best understood as an opportunity cost, not just the cost of borrowing money.
  2. It's important to use appropriate rates for different risks when making investment decisions, as applying a single cost of capital to varying investments can lead to poor choices.
  3. Estimating the cost of capital involves understanding both equity and debt and considering market values. Having a clear method can help make better financial decisions.

Bitcoin Backlash: Back to the Drawing Board?

Musings on Markets • 0 implied HN points • 27 Oct 17
🔮 Crypto Investment Regulation Valuation Currency Market Analysis
  1. Bitcoin is debated as a currency, asset, or commodity. This classification can change how people invest and understand its value.
  2. Currencies are primarily for transactions and storing value, while commodities are useful for something practical. Bitcoin fits more as a currency because it’s used for exchanges.
  3. Blockchain technology may reshape business operations, but not all cryptocurrencies will succeed. Each should be evaluated on its own potential, not just seen as a group.

Deconstructing Amazon Prime: Loss Leader or Value Creator?

Musings on Markets • 0 implied HN points • 17 Oct 17
💼 Business E-commerce Economics Marketing Consumer behavior Valuation
  1. Amazon Prime has grown rapidly since its start in 2005, reaching around 85 million members by 2017. This makes it a vital service for Amazon's business.
  2. The value of a Prime member is significant because they tend to spend much more on Amazon than non-members, often over $1,300 a year compared to around $700.
  3. Amazon faces challenges managing shipping costs and maintaining member growth. If these costs rise too much, it could negatively impact the value of new and existing members.

User/Subscriber Economics: Value Dynamics

Musings on Markets • 0 implied HN points • 05 Jul 17
💼 Business Economics Valuation Revenue Models Business strategy
  1. Valuing users or subscribers involves dealing with uncertainty, and this uncertainty can come from either poor information or unpredictable market changes. It's important to acknowledge these uncertainties when assessing a business's value.
  2. Companies that grow by increasing sales to existing users typically create more value than those focusing only on adding new users. This is because it's cheaper to sell more to people who already use the service.
  3. For a business to succeed in attracting new users, it needs to balance high user value with low costs of acquiring those users. The best companies find ways to create strong networks and leverage data to enhance user experiences.

User/Subscriber Economics: An Alternative View of Uber's Value

Musings on Markets • 0 implied HN points • 28 Jun 17
💼 Business Economics Valuation Finance Market Analysis
  1. Uber's value can be understood better by looking at individual users rather than just its overall revenue. This approach focuses on how much money each user can bring to the company over time.
  2. When valuing a company like Uber, understanding the cost of acquiring new users and the potential profit from them is really important. New users can significantly add to the company's value if they are engaged and loyal.
  3. Corporate expenses should also be considered when assessing a company's total value. High expenses can reduce a company's worth, but if managed well, they might also support growth in the long run.

January 2017 Data Update 10: The Pricing Game!

Musings on Markets • 0 implied HN points • 10 Mar 17
💰 Finance Investing Stock Market Valuation Global Markets
  1. When comparing stock prices, it's better to use price multiples like PE or EV to EBITDA instead of looking at share prices alone. Share prices can be misleading and don't tell the whole story.
  2. Different regions and sectors have their own pricing trends, which means some stocks may be cheap in one market but overvalued in another. Always check the broader picture before investing.
  3. Don’t blindly rely on common rules for finding cheap stocks. It's important to understand the reasons behind a stock's price rather than just focusing on numbers.

Explaining a Paradox: Why Good (Bad) Companies can be Bad (Good) Investments!

Musings on Markets • 0 implied HN points • 09 Mar 17
💰 Finance Investing Management Valuation Market Analysis Company performance
  1. Good companies can be bad investments if they are overpriced. It's important to consider both the company's quality and its market price when investing.
  2. Management quality doesn't always reflect how well a company performs. A poorly managed company might make good investment decisions at the right price.
  3. Investing successfully means looking for mismatches between what a company is worth and what it costs. This helps identify opportunities to buy undervalued stocks.

Apple: The Greatest Cash Machine in History?

Musings on Markets • 0 implied HN points • 09 Feb 17
💼 Business Corporate Finance Valuation Investing Market Analysis Cash Management
  1. Apple has built a huge cash reserve, nearly $250 billion, mostly because it earns more than it distributes to shareholders. This makes it one of the best cash-generating companies ever.
  2. Despite giving back a lot of cash to its investors through dividends and buybacks, Apple's cash balance keeps growing. This shows how strong its business is, even during tougher market conditions.
  3. Investors should adjust their expectations for Apple because it may not come up with big new products as it did in the past. It is now a massive company facing more competition, which can lead to mood swings in its stock price.

January 2017 Data Update 6: A Cost of Capital Update!

Musings on Markets • 0 implied HN points • 26 Jan 17
💰 Finance Investment Corporate Finance Valuation Equity Debt
  1. The cost of capital is a key number in finance that helps companies decide if they should invest. It's important because it serves as a hurdle rate, a discount rate, and influences how much to return to investors.
  2. Calculating the cost of capital involves understanding both equity and debt. The cost of equity reflects what investors expect to earn, while the cost of debt shows how much it costs to borrow money.
  3. The cost of capital can vary by country and industry due to factors like risk and tax rates. Analysts often focus too much on refining these numbers, while the real challenge lies in accurately estimating earnings and cash flows.

January 2017 Data Update 3: Cracking the Currency Code

Musings on Markets • 0 implied HN points • 20 Jan 17
💰 Finance Valuation Currency Investment Risk management Capital Markets Economic Indicators
  1. Understanding currency is really important for evaluating companies. You can't just ignore how different currencies affect cash flows and the value of assets.
  2. You should be able to value a company in any currency without changing its actual worth. The key is to keep your estimates consistent across cash flows and risk rates.
  3. When estimating future exchange rates, a simple approach is to consider how inflation rates differ between currencies. It helps you make better valuations without overcomplicating things.

Narrative and Numbers: How a number cruncher learned to tell stories!

Musings on Markets • 0 implied HN points • 11 Jan 17
💼 Business Valuation Finance Storytelling Education Investing
  1. Both storytelling and number crunching are important in business. It's good to balance both skills for better decision-making.
  2. A story can help make sense of numbers in valuation. Starting with a strong story can guide how you look at financial data.
  3. Valuation isn't a one-time thing; it's an ongoing process. Being open to feedback and willing to update your stories and valuations is key.

Myth 5.5: The Terminal Value ate my DCF!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Investing Valuation Cash Flow
  1. A high terminal value in a DCF isn't a flaw; it's typical for stock valuations. Most investor returns come from price appreciation, making terminal value a large part of the overall valuation.
  2. Just because the terminal value is prominent doesn't mean your growth assumptions are unimportant. In fact, those assumptions critically impact your terminal value.
  3. When evaluating a company, especially a high growth one, don't ignore the early cash flows or growth period. They're essential in calculating a reliable terminal value.

Myth 5.4: Negative Growth Rates forever? Impossible!

Musings on Markets • 0 implied HN points • 30 Nov 16
💼 Business Finance Valuation Growth Investment Corporate strategy
  1. Negative growth is more common in businesses than people usually think, with many firms experiencing revenue declines over time. It's important to recognize that not all firms will continue to grow.
  2. A company's life cycle affects its growth expectations. Companies can go through stages of development where negative growth becomes a possibility, especially in declining markets.
  3. When estimating a company's value, considering the potential for negative growth can lead to a more accurate and realistic valuation. Sometimes, shrinking a company can be a better strategy than trying to sustain growth.

Myth 5.3: Growth is good, more growth is better!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investing Corporate Finance Economic Growth Financial Analysis
  1. Growth isn't always good. It often comes with costs and needs to be carefully managed.
  2. The value of a company is more about how efficiently it can grow, not just how much it grows.
  3. When estimating future value, it's important to consider reinvestment and returns on investment, as they affect both cash flow and growth potential.

Myth 5.2: As g-> r...To Infinity and Beyond!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investment Economics Market Trends Risk management
  1. When using the perpetual growth model in valuations, the growth rate should never exceed the overall economy's growth rate. This keeps your calculations realistic.
  2. It's best to use the risk-free rate as a cap for growth because it takes inflation into account and provides a solid basis for your numbers.
  3. Valuing companies with overly optimistic growth rates can lead to big mistakes. Keeping growth rates in check helps maintain value accuracy.

Myth 5.1: If you don't believe in forever, you cannot do a DCF

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investment Market Analysis Financial Models Asset management
  1. You don't need to believe cash flows last forever to do a discounted cash flow (DCF) analysis. There are ways to estimate cash flows that make sense even if the asset doesn't last indefinitely.
  2. Terminal value is very important in DCF calculations, so you can use methods like annuities or liquidation value to estimate it. These options can provide a realistic view of an asset's worth without assuming it will last forever.
  3. One common mistake is using market multiples for terminal value, which can skew the true value of a business. It's better to focus on cash flows and intrinsic value rather than just market pricing.

Myth 4.5: DCFs break down with near-zero risk free rates!

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Valuation Interest Rates Investment strategy Risk management Market Analysis
  1. Lower risk-free rates can increase the value of future cash flows in discounted cash flow (DCF) models. This means that when interest rates go down, it can make companies look more valuable.
  2. It's important to adjust growth rates and risk premiums alongside changes in risk-free rates. If you change one factor without looking at the others, your valuation might be way off.
  3. Using historical data for risk premiums while ignoring current rates can lead to misvaluations. As rates change, you need to rethink the risks associated with investments.

Myth 4.4: The D(discount) rate is a receptacle for your hopes and fears

Musings on Markets • 0 implied HN points • 04 Nov 16
💼 Business Valuation Finance Investing Risk management Decision-making
  1. The discount rate in cash flow valuation shouldn't be used to reflect personal hopes or fears. It's meant to account for business risks, not management quality or competitive advantages.
  2. Risks like nationalization or distress risks are better handled with decision trees or other tools instead of altering the discount rate. This helps provide a clearer picture of an asset's value.
  3. Using a margin of safety or doing more homework won't eliminate risk in valuations. It's important to recognize that some risks are inherent and cannot be fully mitigated.

Myth 4.3: The D cannot change (over time) in a DCF

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Valuation Investing Cash Flow Equity
  1. Discount rates in a DCF can change over time, so don't think you need to stick with one forever. It's important to adjust them based on the company's growth and risks.
  2. Adjusting discount rates makes valuations more accurate, especially for young or transitioning companies. Big changes in these firms mean their risk should be reflected in the discount rate.
  3. To estimate changing costs of capital, begin with the current rate and make adjustments based on planned changes in the company's debt and business mix, moving towards stable growth if the company matures.

Myth 4.2: It's all about D in the DCF

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Valuation Investment Risk management Market Analysis Behavioral Finance
  1. Many people focus too much on discount rates when valuing investments, often ignoring cash flows and growth rates, which are just as important.
  2. Getting the discount rate wrong can lead to big mistakes in valuation, but the range of costs of capital is often quite similar across different companies.
  3. Instead of stressing over discount rates, we should prioritize accurately estimating future cash flows and growth, especially for younger companies.