[Course Summary] (Part II) Valuation - Valuation Themes

By TheBusinessGrad | TheBusinessGrad | 13 Jun 2021

Hello everyone!

In the previous post I summarized the introduction part of the Valuation course by Aswath Damodaran. Now we can continue tipping our toes into the course with valuation themes. In this lecture, AD talks mainly about the core idea behind valuation and how it differs from putting price on something. Here are my lecture notes:

  • AD's 59th semester teaching valuation (no doubt he knows what he is talking about)
  • Why do valuation? Avoid the lemming problem: ”they must know something that I don't” - not mindlessly following the herd
  • In a valuation you can reach any number you want. 
  • Valuation gives you a life vest - when everyone changes their minds you have something to hold onto. 
  • Valuation is not a science - no universal laws
  • Valuation is not an art - great art is not teachable
  • Valuation is a craft - it can be learned by doing
  • You can value anything with a cashflow, if there is no cashflow (e.g. A Picasso) you can only ”price” it (by looking at similar works / sells)
  • Value is driven by cash flows, growth, risk
  • Price is driven by demand and supply.
  • Is there a gap between the value and the price? In an efficient market, price is the best estimate of value, but markets are not efficient.
  • A good valuation is a combination of numbers and story
  • Try to be an imaginative number cruncher and disciplined storyteller
  • If you value something you should be willing to act on it - you have to have faith in your valuation as well as faith that market prices will move toward your valuation-

Hopefully, the concept of Valuation is also starting to become clearer for you. See you at the next lecture's summary, which will be about "The Bermuda Triangle of Valuation".



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