Dangerfield in a Finance Class/Search Strategy

 

Why do the typical MBA classes teach Beta, Capital Asset Pricing Theory, Value at Risk? Do those terms and theories have anything to do with REAL investing?  What would Graham say about the typical MBA finance class?  We will delve into those terms in another reading (Discussed in Montier’s book, Value Investing–which was emailed to YOU.)

If you wish to take MBA-level finance courses for free go here: http://pages.stern.nyu.edu/~adamodar/

The next link contains an offensive video about picking-up women (please, those of sensitive dispositions ignore/delete). However, there is a lesson here for deep value investors–a hint of where to look for value.  In places where other investors are experiencing anguish. Video: Deep Value Search Strategy

Tomorrow/Saturday I will post the lecture notes for Lesson 1. Then we will view a Deep Value Activist in action.

You may enjoy reading an interview of Deep Value’s author

Deep Value Author, Tobias Carlisle-interview-with-harvest-and-its-community

Deep-Value-at-authorsgoogle/ An excellent video of Deep Value Investing.

www.greenbackd.com is worth scrolling though and viewing past videos.

4 responses to “Dangerfield in a Finance Class/Search Strategy

  1. Hello John
    Thank you for helping the community 🙂 at large. I am excited to do this course alongside some very smart people on this community

    I joined a bit late and I have completed DV preface, Grahams MOS and Quantitative Value (4 pages). Yet to read Mr Market and am not sure of the sequence. Do I dive right into the lesson…there is a lot of stuff though.

    Do I understand that everything other than DV is supplemental stuff and we go through the course chapter by chapter?

    please advise

  2. I’m going to defend Damodaran here.

    Using DCF allows you to relate “growth” with “value”. A growing company is presumably worth more than a non-growing company, and should be awarded a higher multiple. How much higher? Well, a DCF can show you.

    DCF calculate “intrinsic value”, i.e. how much a company is worth, at least in theory.

    Value investors are not, according to Damodaran, intrinsic value investors. They are “pricers”. In other words, they generally price according to some market-derived metric. For example, they may say a company with static earnings should trade on a P/E of 10, whereas if it can grow at 7%, it is worth 15; and so on. My point is not to argue about what particular value a value investor will use, only that that is how he thinks about the value of a company.

    An intrinsic value investor like Damodaran is able to obtain an intrinsic value for a company without reference to the Market.

    Greenwald’s counterargument to all this is the “if you add good information to bad information, you get bad information”. Fine. But Damodaran would immediately accept all the inherent uncertainties that are involved in a DCF calculation. Absolutely everyone is in the same boat, mind. So, you’re not trying to get a “perfect” valuation, just one that is better than everyone elses. This is why he likes to value difficult-to-value companies. It’s in the difficult-to-value companies that the most opportunities are likely to be found.

    We must remember, we’re in the business of predicting the future. Every model of value rests upon assumptions. You, as value-investors, are making assumptions about the future, whether you acknowledge it or not, and whether you are disdainful about it or not.As your PDF on OmahaValueInvesting notes, Damodaran views value investors as often having the 3 R’s: rigidity (stunning lack of faith in markets getting anything right), righteous (growth investors are “dilettantes” and momentum investors are “lemmings”0 and ritualistic (claimed to have read “Security Analysis”).

    Damdoran often writes about different styles of investing, so it’s not like he doesn’t understand the basic premises of value investing. He is acutely aware of some of their drawbacks, and acknowledges that there are plenty of investors that can do well under each style.

  3. He is acutelly aware of their drawbacks… but after 2008. I was following some of his classes before and many of the warnings he has in his course were not there before… : )

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