Hitesh portfolio

@arvind_aries

Its tough to explain how to value a stock in a post. Plus it is not a one size fits all kind of calculation. The same stock will be valued differently in different business environments and one has to keep pace with these developments. e.g Bajaj Finance. You can see stark difference in valuations within 2-3 months with stock having corrected from levels of 5000 to less than 2000. Because the business environment has changed.

The idea should be to get things approximately right rather than precisely wrong. One needs to keep observing how markets value stocks and how valuations and perceptions regarding the company undergo change and what are the triggers for those things.

There are books that should help in learning this topic. Pat Dorsey’s book on five rules for successful investing provides background on how to analyse different companies in different sectors. If you are up to reading a lot of theoretical stuff then you can go through Prof Aswath Damodaran’s writings. You can also read up Copeland’s work on valuations. I myself have learned valuations by observing things in the market and have not read the latter two authors. For businesses with consistent predictable cash flows and growth, one can go for DCF. I personally don’t use it.

Many times valuation is a game where beauty lies in the eyes of the beholder.

A useful thread on the subject is The ART of Valuation

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