We’ve talked about valuation methods on our InvestED podcast before, but this week I’m sharing a little trick on how I quickly value businesses to determine if they are worth diving into or not. Here are 6 steps to perform a 45-second “Quick and Dirty” valuation using my Rule #1 Toolbox.
In Episode 93 You’ll Learn:
A brief overview of Charlie Munger’s 4 Principles of Investing:
You are capable of understanding the company (Meaning)
Company has an intrinsic competitive advantage that is durable (Moat)
Company has management with integrity and talent (Management)
The company is available at a price that is fair (Margin of Safety)
What we mean when we ask what a company is “worth.”
How to determine the price vs. value of a company and why it is important.
How do you ever really know what the value of a company is?
How to perform a 45 second “Quick and Dirty” valuation using the Rule #1 Toolbox
Look at the historical track record
See if the moat growth rates are parallel
Make sure the moat growth rates are trending up
Check if the company has debt- if any, how much?
Check the return on equity
Check the return on investment capital
Which trends to look for when valuing a company.
Show Notes:
InvestED: Ep. 84 – Guy Spier on Investing, Research, and Management
Send your comments and questions to questions@InvestEDpodcast.com
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How to Pick Rule #1 Stocks
5 simple steps to find, evaluate, and invest in wonderful companies.
