Questions on Valuing a Company

Questions on Valuing a Company

Thank you, really good points!

One more question. It’s about valuing a company. When I find a company that has a franchise and economies of scale, I need to solve the real value of the stock. I think it’s very hard to foresee company’s earnings and cash flows in the future and therefore exact pricing is very difficult. I assume here comes in the margin of safety concept. It’s of course very useful to compare this company to other similar companies in the same industry. I don’t trust analysts’ earnings estimates but at the same time I don’t believe I could do any better myself. What I mean is that earnings can vary a lot and conducting exact cash flows and ultimately calculating the stock price is hard. I believe I can make an analysis whether the company I am looking at is undervalued, fairly valued or overvalued but setting a fair price seems really hard at the moment. I understand that every business is different and learning valuation techniques takes time and there is no magical trick to value businesses. Is this something I learn by studying companies and businesses?


Baupost’s Seth Klarman Suggests That The U.S. Could Be Uninvestable One Day

Seth KlarmanIn his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More


Date: Thu, 22 Oct 2015 08:59:57 -0400

Subject: Re: VS: Your questions posted on

I will post this (my response here) in the comments section. Since you have already ready Sec. Analysis and other books, you have the background to start practicing and applying your knowledge. Don’t spend too much time following gurus or financial pundits. Develop your own knowledge in areas that interest you.

For example, you could take a particular industry that is dominant in Finland or Northern Europe and study the companies in that industry. Wy are some companies more profitable than others? Are there any great management teams who are both good operators and capital allocators–follow them. You might be able to build on your knowledge in a more systematic way. Are there any industries that really interest you. Say you become interested in studying franchises and you notice the power of regional economies of scale–where a firm dominates a particular region and has lower unit costs than competitors. So you go looking for waste hauling companies, or auctioneers, or dominant service companies.

If you develop your own ideas and analysis you will be a much better investor in the long-run.

In my peripatetic life I have been a ruby smuggler, commodity trader, securities analyst, investment banker, and entrepreneur. Each role taught me more about value investing. - John Chew - The Editor
Previous article Greed And Fear Cycle [CHART]
Next article Battling Bias Across Disciplines

No posts to display