Keeping Stock Valuations Simple by Investment Master Class

“In 44 years of Wall Street experience and study I have never seen dependable calculations made about common stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra.  Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience” Ben Graham

Simplicity or singleness of approach is a greatly underestimated factor of market success.  As soon as the attempt is made to watch a multiplicity of factors even though each one has some element to justify it, one is only too likely to become lost in a maze of contradictory implications.. the various factors involved may be so conflicting that the conclusion finally drawn is no better than a snap judgement would have been”  Garfield Drew, 1941

“The reason our ideas haven’t spread faster is they’re too simple.” Charlie Munger

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“Any attempt to value businesses with precision will yield values that are precisely inaccurate” Seth Klarman

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“We’d argue there’s a lot of false precision in our business and that the best investments don’t require a financial model that goes out five significant digits” Ira Rothberg

"We never sit down, run the numbers out and discount them back to net present value ... The decision should be obvious"  Charlie Munger

“It is better to be approximately right, than precisely wrong” Warren Buffett

"There's no such thing as precise intrinsic value" Mohnish Pabrai

"There are so many factors involved that it is never wise to attempt to judge intrinsic value to the last eighth or even point" Phil Fisher

"Given that the future is inherently uncertain, we do not believe the value of any business can be known with certainty at a given point in time, so our aim is to be generally right as opposed to precisely wrong."  Wally Weitz

"It is important to understand that intrinsic value is not an exact figure, but a range that is based on your assumptions" Jean-Marie Eveillard

"The cost of obsessing on precision is to often miss the forest for the trees" Frank Martin

“Having more information doesn’t necessarily improve decision-making. We know from studies of horse racing than when handicappers receive more information about horses and riders, they become proportionately more confident even though they are no more likely to pick the winner. When analysts have too much data, there’s a danger they won’t see the wood for the trees” Marathon Asset Management

"I’m reminded of a study which showed that as the number of variables requiring analysis increase, the odds of success decline, yet the confidence of participants soar due to extensive time and energy invested." Allan Mecham

“Using precise numbers is, in fact, foolish: working with a range of possibilities is the better approach” Warren Buffett

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“When we think about intrinsic value, it is always a rough guess. In my mind, if I throw out a number to you such as “I think intrinsic value for this stock is 100,” What I’m really saying, and the way we internally use that statement is “it’s 100, give or take 10% to 15%. It might be 85, it might be 115” It’s 100 with implied error bars around the statement." Ken Shubin Stein

“Charlie and I admit that we feel confident in estimating intrinsic value for only a portion of traded equities and then only when we employ a range of values, rather than some pseudo-precise figure” Warren Buffett

“It is easy to confuse the capability to make precise forecasts with the ability to make accurate ones” Seth Klarman

“I’ve found most of our investments I can summarize in a sentence” Glenn Greenberg

" The truly big investment idea can usually be explained in a short paragraph" Warren Buffett

“Keep it simple. Your thesis should be on the back of a postcard if it’s right.” Bruce Berkowitz

"When I invest in a company, I like to be able to explain it to my children in a single sentence." Robert Vinali

“In depth information does not mean indepth profits” Dave Dreman

"In general, I haven't run spreadsheets and I find that, if there is a need to run a spreadsheet, that is a red flag to take a pass" Mohnish Pabrai

“Never invest in any idea you can't illustrate with a crayon” Peter Lynch

“Conservative forecasts can be more easily met or exceeded. Investors are well advised to make only conservative predictions and then invest only at a substantial discount from the valuations derived therefrom.” Seth Klarman

“I think analysts spend too much time building models and being myopic in they don’t spend enough time trying to take a broader perspective” Michael Karsch

“Businesses, unlike debt instruments, do not have contractual cash flows. As a result, they cannot be precisely valued as bonds” James Montier

“The essential point is that security analysis does not seek to determine exactly what is the intrinsic value of a given security. It need only establish that the value is adequate” Ben Graham

“Several difficulties confront growth-orientated investors. First such investors frequently demonstrate higher confidence in their ability to predict the future than warranted”. Seth Klarman

“An unresolved contradiction exists: to perform present value analysis, you must predict the future, yet the future is not reliably predictable” Seth Klarman.

“We can’t compensate what we can’t predict with a higher discount rate”  Peter Bevelin

"We try to deal with things about which we are quite certain. You can’t compensate for risk by using a high discount rate.” Warren Buffett

“If modest changes in assumptions cause a substantial change in NPV, investors would be prudent to exercise caution in employing this method of valuation” Seth Klarman

“Investment experts continue to be convinced that their major problems could have been handled if only those extra few necessary facts had been available. They thus tend to overload themselves with information, which usually does not improve their decisions but only makes them more confident and more vulnerable to serious errors”. Dave Dreman

“The value of in-depth fundamental analysis is subject to diminishing marginal returns” Seth Klarman

“The most elegant valuation spreadsheet in the world won’t be worth much if you don’t understand and account for the bigger-picture influence on a company's business” David Iben

"I think it is not how sophisticated you are in your valuation model, but how well you know the business and how well you assess its competitive advantage. This cannot be modelled mathematically, but has more to do with the investor's own experience" Francisco Garcia Parames

"We try to avoid investing in businesses where an exogenous event can completely rewrite your spreadsheet." Gregg Powers

"There are only a few things you have to get right about a company for it to be successful investment. Our view is that if you can get 85% of the way there by answering the big questions, don't waste your time on the last 15% because the marginal utility isn't worth it" Steve Morrow

“A key rule in investing is that you don’t necessarily need to understand a lot of different things at any given time, but you need to understand the one thing that really matters” Dan Loeb

"I always try to use a no brainer test where I should be able to write down within a paragraph exactly why a particular investment will work out and what are the factors that will drive the result.  I write a paragraph and keep it.  If I cannot articulate in

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