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Minyan Mailbag: Discounted Cash Flows



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

Hello Vitaliy:

I must say that you are a refreshing sight for the sore eyes of a long-term value investor. While I really enjoy (and greatly benefit) from what Todd has done with Minyanville, my only gripe has been the lack of longer term investor perspective. I'm not a day trader or manage a hedge fund and so at times feel, "like I'm in the slow lane of I95," with much of what's discussed on the site.

My investment philosophy is to bang out a bunch of singles, a few double/triples, and when the right opportunity arrives, strike the pitch out of the park. I believe if I can consistently reach base and then hit that homer every 5-7 years, then in the end, I will arrive at my financial goals without the gut-wrenching turbulence along the way. Slow and steady wins the race type mentality. Enough of that - just some background of where I'm coming from.

Vitaliy, today
your post mentioned a discounted cash flow model, which I have been learning to include in my analyses. Would you be willing to share your formula or at least point me in the direction of some good resource tools? Also, can you provide some good reads or online references to bolster my bag of skills when assessing long-term value.

Again, welcome and looking forward to more of your insights. And as always thanks for sharing!

Take care,
Minyan Tony


Thank you! Regarding discounted cash flow model. I wish there was an easy formula, there is not. The model itself is not complicated but there are a lot of moving parts. It usually takes me two, three hour lectures to teach to my students. The good news is there is a very good book that does an excellent job explaining the ins and outs of the model. It is published by CFA Institute (formerly known as AIMR), called Analysis of Equity Investments: Valuation. It is a very good reference book to have in your fundamental arsenal. I make it an optional read in my class.

Keep the questions and comments coming.


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