Description

Today we discuss:

Why do you value a company?

• First principle: Opportunity Cost
  
• Your returns are determined by the price you pay
  
• It's a good anchor point
  
• If there is some event that pushes the whole market down, if you know the value you can pick up great companies at cheap prices
  
• Forces you to put in the work thereby avoiding obvious mistakes
  
• You need to find a dollar that is selling for fifty cents
  

Intrinsic Valuation

• Present Value of future cash flow
  
• If you had to invest in a neighborhood lemonade stand? How much will you pay for it?
  
• Very simple lemonade example (https://docs.google.com/spreadsheets/d/1FBu2Td7vnva9DHSvWVOL3-XwTAQ1UtXT9Ihk5sO1G9E/edit?usp=sharing)
  
• Discount rate: Let’s say that you’d take $900 today instead of $1000 exactly a year from now. That means you’d accept a 11.1% “discount rate” on that transaction.
  
• Growth rate
  
• Terminal value