Team Favorite At the Money: Valuation Is an Exercise in Faith

26 snips

Feb 19, 2025

Aswath Damodaran, a renowned Professor at NYU Stern School of Business and an authority on valuation, engages in a riveting discussion about the often blurred lines between price and value. He highlights the importance of intrinsic value assessment and how investor perceptions can lead to varied estimations. Delving into complexities beyond traditional metrics, he uses Nvidia as a case study. The conversation also emphasizes the necessity of faith in investing, underlining that over time, markets tend to realign with fair value.

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ADVICE

Investing vs. Trading

Understand the difference between trading and investing.
Focus on value if you are investing and price if you are trading.

INSIGHT

Intrinsic Value Components

Intrinsic value is based on cash flows, growth, and risk.
Different investors may assess risk differently, leading to varying valuations.

INSIGHT

Pricing vs. Valuation

Metrics like price-to-sales and price-to-earnings are pricing metrics, not valuation metrics.
These compare a company to others, focusing on relative price rather than intrinsic worth.

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