We Study Billionaires - The Investor’s Podcast Network

TIP567: The Evolution of Value Investing w/ Brian Feroldi

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Jul 30, 2023

Brian Feroldi, a skilled content creator and writer for the Motley Fool, dives into the valuation mindset spectrum and its implications for investors. He shares insights on the evolution of value investing, contrasting it with growth strategies. The podcast highlights key valuation methods for various growth stages, along with lessons learned from market volatility in 2022. Feroldi discusses stock-based compensation and evaluates companies like NVIDIA and MercadoLibre, shedding light on the importance of tailored investment strategies and long-term thinking.

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INSIGHT

Valuation Mindset Spectrum

Valuation is a spectrum, not a binary choice between growth and value.
Investors should determine their position on this spectrum.

ANECDOTE

Google Example

Investing in Google early would have yielded high returns regardless of valuation.
Finding companies like Google is rare; valuation becomes more critical for average investments.

ADVICE

Finding Your Place on the Spectrum

Understand your risk tolerance, time horizon, and personal preferences.
Consider your comfort with volatility and whether you enjoy bargain hunting.

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The theory of investment value

John Burr Williams

John Burr Williams's "The Theory of Investment Value" is a foundational text in finance that introduced the concept of intrinsic value and its application to investment decision-making. The book lays out a framework for valuing assets based on their expected future cash flows, discounted back to their present value. This approach, known as discounted cash flow (DCF) analysis, remains a cornerstone of modern financial valuation. Williams's work emphasizes the importance of considering a company's future earnings potential and the risks associated with those projections. The book's rigorous approach to valuation has had a lasting impact on the field of finance and investment.

The essays of Warren Buffett

Lessons for Corporate America

Warren Buffett

This book is a comprehensive collection of Warren Buffett's annual letters to Berkshire Hathaway shareholders, edited by Lawrence A. Cunningham. It provides valuable insights into Buffett's investment philosophy, corporate management, and business strategies. The letters are organized into thematic chapters, making it easier for readers to understand Buffett's views on various topics such as value investing, executive compensation, and market fluctuations. The book is praised for its clarity, wisdom, and practical advice, making it a definitive source for understanding Buffett's approach to business and investing.

Common Stocks and Uncommon Profits

Philip A. Fisher

In 'Common Stocks and Uncommon Profits', Philip A. Fisher outlines his investment philosophy, which focuses on identifying and investing in high-quality growth companies. The book is renowned for Fisher's '15 points to look for in a common stock', which include evaluating a company's products, management, sales organization, research capabilities, and long-term growth prospects. Fisher advocates for a qualitative approach to investing, emphasizing the importance of understanding the business and its management rather than relying solely on quantitative metrics. The book also discusses when to buy and sell stocks, the role of dividends, and the pitfalls of short-term thinking in investing.

Poor Charlie's Almanack

The Essential Wit and Wisdom of Charles T. Munger

Charles T. Munger

Peter D. Kaufman

Originally published in 2005, Poor Charlie's Almanack is a collection of eleven talks delivered by Charles T. Munger between 1986 and 2007. Edited by Peter D. Kaufman, this book draws on Munger's extensive knowledge across various fields to provide a framework for rational and rigorous approaches to life, learning, and decision-making. It is renowned for its sharp wit and rhetorical flair, making it an essential read for investors, entrepreneurs, and anyone seeking to enhance their wisdom and critical thinking skills.

The intelligent investor

Jason Zweig

Benjamin Graham

Written by Benjamin Graham, 'The Intelligent Investor' is a seminal work on value investing that has inspired millions since its original publication in 1949. The book emphasizes the importance of distinguishing between investing and speculation, calculating the intrinsic value of companies, and maintaining a margin of safety. The revised edition includes updated commentary by Jason Zweig, who provides modern examples and insights to help readers apply Graham's principles in today's market. Warren Buffett, a disciple of Graham, has praised the book as 'the best book about investing ever written'.