The Importance of Reverse Discounted Cash Flow Operations

2min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

In your book, you talk about looking for companies where the markets' expectations aren't pricing in what you think will happen. You can simply carry out a reverse DCF operation and compare the markets assumption with that of your own to decide whether you want to invest in the company or not. I'm much more comfortable being a high P multiple for a business which get us to basic human needs like shelter foodbasic essentials like medicines. There you can basically have a much more longer time horizon and longer set of assumptions but in businesses which can be threatened by technology, they're trying to become much more conservative in my estimates.

Robert Leonard & Gautam Baid discuss Gautam's investment evolution, Buffett's influence, behavioral edge, simpler businesses, value traps, negative info, disqualifying features, Indian stock market & more!

Gautam Baid is the Managing Partner of Stellar Wealth Partners India Fund and Equity Advisor of Stellar Wealth PMS. He has a long-term, value-oriented approach and has worked in portfolio management and investment banking. Gautam is also the author of The Joys of Compounding.

IN THIS EPISODE, YOU’LL LEARN:

00:00 - Intro

02:30 - How Gautam’s investment philosophy has evolved over the years after discovering the art of intelligent investing through teachings of Warren Buffett and value investing.

11:22 - Why he believes the biggest edge investors can have in markets today is behavioral rather than informational?

22:45 - What are “disqualifying features” and how investors can apply these into their own investment checklists?

25:52 - Why Gautam focuses on investing in simpler businesses that require fewer assumptions.

32:27 - Why great companies may not always be great stocks.

35:06 - How to distinguish between a company that is undervalued and out of favor vs a value trap?

47:52 - Why incorporating “negative information” into your investment process may be useful.

53:56 - His thoughts on the potential opportunities in the Indian stock market within the scope of a value oriented, fundamental lens.

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Check out Gautam’s book: The Joys of Compounding.
Check out: Stellar Wealth Partners.

NEW TO THE SHOW?

Check out our Millennial Investing Starter Packs.
Browse through all our episodes (complete with transcripts) here.
Try Kyle’s favorite tool for picking stock winners and managing our portfolios: TIP Finance.
Enjoy exclusive perks from our favorite Apps and Services.
Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets.
Learn how to better start, manage, and grow your business with the best business podcasts.