David Trainer5 Comments
May 1, 2015
In case you missed it, or in case you wanted to watch it again, here is our live webinar from this week. In it, New Constructs CEO David Trainer explains the “Valuation” portion of our stock ratings, and our stock ratings overall.
Loved it. I had a couple of thoughts as I listened….
On Investor Risk:
The NetFlix example highlights a very important point about investors taking on unnecessary risk and reminds me of the Joel Greenblatt comment in his Little Blue Blook that really goes to the heart of avoiding unnecessary risk….
“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.” I think New Constructs helps to take away the “choosing stocks without any idea of what you are looking for” risk, which is the real risk elephant in the room.
Economic book value….the no-growth value of the business, adjusted for all stake-holders. Pay for the no-growth and get the upside (or any embedded optionality) for free at P/EBV WACC) for shareholder value to catch up to price.
I like to think of it as the number of years market requires moat to exist (ROIC>WACC) for shareholder value to catch up to price.
I think of Economic book value as the no-growth value of the business, adjusted for all stake-holders. You can pay for the no-growth portion and get the upside (or any embedded optionality) for free at P/EBV =1
Big fan of the white papers and new education section. The B-Schools should be incorporating this as part of their curriculum.
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