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14-12-2023, 08:20 AM
It is ironical, but I read other people’s analysis not because I don't know how to analyze companies, but because I know.
Many metrics can be used to analyse companies. At the same time there are several analytical techniques ranging from the simple SWOT to Porter’s 5 Forces. It can be overwhelming when you are starting out.
I am a long-term value investor where valuation is key. As such, I focus on those that drives the intrinsic value. These are the free cash flow, growth, and cost of capital.
The free cash flow in turn is affected by the earnings and reinvestment. Growth can be derived from the return and reinvestment rate. And the cost of capital reflects the risk of the cash flow including the financial risks.
You can understand why I focus on earnings, returns Reinvestment, and financial strengths.
Furthermore, all valuations are based on assumptions. The challenge is to ensure that the assumptions are realistic. As such, valuation should be preceded by a detailed fundamental analysis as they will then give you a sense of what to assume.
But of course, you can be biased. I look at other people’s analyses as a check for this. So I spent considerable time looking at other blogs, and other investment sites.
For more insights on how you can benefit from investment case studies, go to “Can we learn anything from investment case studies?”
Many metrics can be used to analyse companies. At the same time there are several analytical techniques ranging from the simple SWOT to Porter’s 5 Forces. It can be overwhelming when you are starting out.
I am a long-term value investor where valuation is key. As such, I focus on those that drives the intrinsic value. These are the free cash flow, growth, and cost of capital.
The free cash flow in turn is affected by the earnings and reinvestment. Growth can be derived from the return and reinvestment rate. And the cost of capital reflects the risk of the cash flow including the financial risks.
You can understand why I focus on earnings, returns Reinvestment, and financial strengths.
Furthermore, all valuations are based on assumptions. The challenge is to ensure that the assumptions are realistic. As such, valuation should be preceded by a detailed fundamental analysis as they will then give you a sense of what to assume.
But of course, you can be biased. I look at other people’s analyses as a check for this. So I spent considerable time looking at other blogs, and other investment sites.
For more insights on how you can benefit from investment case studies, go to “Can we learn anything from investment case studies?”