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1/Tonight I start Security Analysis @Columbia_Biz. This is my 28th consecutive year teaching the course and I am as nervous as ever. Preparation always provides a wonderful opportunity to take stock of process.…
2/Ben Graham started this program in 1927 at the Extension Division of Columbia College. He taught in a building a few blocks from where we'll be tonight. Graham didn't teach at the business school until 1951 - and he had a pretty good student in that class - @WarrenBuffett
3/People often think about value investing in one of two ways: (1) statistical factors - e.g., P/B, P/E; or (2) buying securities with prices below value. I am firmly in the second camp, although the approaches are not mutually exclusive Sometimes statistically cheap = good value
4/A big part of the story is the massive shift in the form of investment, from tangible to intangible. This means analysts have to go back to basics and figure out the *magnitude of investment* and the *return on investment,* whether on the IS or BS…
5/Acknowledging this shift changes the discourse on corporate investment. "Recent studies examining Capex lament the declining trend in firms’ operating investments. The trend turns positive once the investment portion of Main SG&A is included."…
6/Shout out to @d_mccar on his work on Customer-Based Corporate Valuation. Great stuff:…
7/We spend a lot of time discussing the limitations of multiples for valuation. You earn the right to use a multiple only when you demonstrate that you understand the economic assumptions that are behind it.…
8/And expectations remain central. What has to happen for the price of a stock to make sense? No one knows how the future will unfold, but you can stack the odds in your favor. Steven Crist describes this beautifully in another probabilistic domain.…
9/ I will finish by noting some sources of inspiration. The first is my mentor, collaborator, and friend Al Rappaport. I will do my best to translate his wisdom to my students.
10/ Next is the @sfiscience, an extraordinary institution that ignores traditional academic disciplines and considers vexing problems at the intersection of disciples. A wonderful combination of open minds and rigorous methods.
11/ Finally, the mental models approach advocated by Charlie Munger and the torchbearer for the approach @ShaneAParrish @farnamstreet…
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