Take very good care Aswath, because you are the only person that can teach us about valuation, and with all of your data and with fundamentals. Hector from Mexico.
Thank you for sharing your thoughts time and time again, always a pleasure to listen and learn, "If I've seen farther it's by standing on the shoulders of the giants."
Thank you very much for these lessons, they have been an amazing help. I was wondering if the FCFF approach used for Boeing is usable for REITs as well? Or is a different method better suited for REITs? I've been struggling to value them as they invest from new debt + new shares rather than from the FCF.
I have a question that might be silly, I notice we are calculating EBIT instead of EBITDA here in the valuation model, is that because the reinvestment figure formula has something built-in that added back the D&A somehow? I guess for some of the heavy asset modelled business D&A would have a big impact to the profit figure
Reinvestment = Cap ex - Depreciation + change in working capital. You are adding back depreciation. You cannot start a FCFF calculation with EBITDA ever. You will miss the tax benefit from depreciation.
Professor, Is the key question resilience ? Buybacks and dividends return cash back to shareholders. Investment expand capacity and increase risk. But cash / liquidity on balance sheet has a "resilience" value ? (provided the management has credibility not to squander cash and allocate capital). How much cash is enough resilience ? (eg: revenue loss for a quarter or a year when markets are closed... like we do for home finances?)
Hi Professor Damodaran, although your blog post refers to a new set of spreads for the various credit ratings these don't appear to have found their way into your latest Ginzu spreadsheet linked to the blog. Will you be updating them? Many thanks & best regards, Rob
So you've done a few of these now right? Buybacks, Debt, Buffer. I'm very curious what the results would look like if you would to combine those factors into one equal weighted rank based formula.
Professor, may I kindly ask what tools do you use to research your data please? Thank you for the insightful video, love how you start with picture and narrow in
I use S&P Capital IQ. It takes minutes to download the raw data and a few hours of working with them. It is easier than it looks. And Sumedh, I run a solo operation. I am way too much of a control freak to let someone else do it for me. One of my many weaknesses!
@@AswathDamodaranonValuation Hi AD, Thanks for the wonderful info. Quick Question : Have you found any major discrepancies in numbers in Reported IS/BS/CF vs the Capital IQ numbers? I'm using the same for extracting numbers like Net Working Capital or Total Debt and seems they are some way off the actuals. Do you conduct an Audit on the Cap IQ actuals and Earnings estimates vs Company reported info?
Hi Aswath, could you provide us some insights on these rallies, how are people so optimistic and seeing the light @end of the tunnel that trump is showing. Where was this optimism just a month ago. suddenly the market is rallying like there wasn't any economic slowdown, nothing really happend.. while the markets in Asia are behaving as per their economic slowdown.. any help here?
Even from a purely financial perspective, it makes little sense for the business to buyback stocks during strong bull markets. You are going to pay top dollar for your equity to drive up its price even further when growth is strong? That is incredibly myopic and we all know why it happens. CEOs looking for big bonuses and then jumping ship ASAP. The shareholders get their payday and jump ship with him. It's not a philosophy that promotes financially healthy companies or long-term investing. No, it would make more sense to just sit on the cash until either a good investment opportunity arises or a crisis arises and then you can buyback stock will the price is depressed to support equity during steep drawdowns.
Right on brother. Corps. Borrowed over 6 trillion over the last 10 years and used the majoriy to buyback stock. Now the fed has to buy corp bonds. Gee, how did that happen?
Yay and nay. If you have $X of income with no great investment opportunities, you're looking at three options, increase cash, dividends, or buybacks. Buybacks increase stockprice & reward some investors (as well as mgmt), dividends increase desirability of stock (theoretically at least) & rewards investors, and cash provides no investor upside while providing resilience in the face of crises. My argument is not that these companies necessarily made poor micro decisions with buybacks, but that the macro environment is such that rewards buybacks to an outsized degree. In normal circumstances, everyone wins (investor, mgmt).
eliterun But isn’t that exactly why it is Myopic? Rather than sitting on cash, companies could invest in R&D or rather in buying smaller companies that have a great product or a product in development, or a great R&D team. That would be an investment in the long term. But these kind of investments are not rewarding in the near term to management that seeks rewards in the next 3-5 years because of their stock options. Think about Boeing actually investing in serious R&D and building a new plane model rather than working with 737 from the 1960’s and basically just changing the engines. They would avoided the two crashes and saved hundreds of lives and would have saved face and their stock price too and would have saved themselves from all the hate that they are receiving now.
The point is, don't borrow to buyback your own stock at inflated prices for the health of the company. They have lost trillions now and still owe the money.
Bill Bodge agreed. And I even agree to what you said earlier about buying when the stock prices are low and not when high. Infact company can raise capital by selling shares, but obviously this scenario will work against the owners of stock options and for buying back when prices are crashing, Capital is required, which they don’t have.
Not true. It's the quality of the business not the buybacks. High quality companies with excessive buybacks did not do so bad as bad companies doing buybacks.
You don't have to be right to make money, you just have to be less wrong than everyone else. What a tremendous set of words to live by. Thank you.
Take very good care Aswath, because you are the only person that can teach us about valuation, and with all of your data and with fundamentals. Hector from Mexico.
Hector de Hoyos +1
Single most important Channel in all of RUclips. Thank you so much Professor, stay safe and healthy please
Thank you for your time and your effort. Giving away asking nothing back. You're the best. Take care, blessings for you and your family.
Thank you very much Sir for your high quality content.
Thank you for sharing your thoughts time and time again, always a pleasure to listen and learn, "If I've seen farther it's by standing on the shoulders of the giants."
Thanks for the free education Professor. Much appreciated!
Thanks for the high-quality video!
In a time of hysterics, I greatly appreciate your calm and thoughtful analysis. Thanks again for your work here!
Again Mr Damodaran. Thank you so much!
You are a gift. Thank you. Stay safe 🙏
Thanks for the update sir!!you are very forward looking !! i haven't seen any person as dedicated and aggressive as you are !!
Thank you for both the video and the spreadsheet! Take care.
Brilliant stuff and you have put in a lot of work. Envy you.
Great Stuff professor, ty for the spreadsheet as well!
Thanks for sharing your opinions, for spreadsheet too
Thank your for your update, please keep them coming
Namaste Sir. Thank you very much for your contribution.
Excellent video with great perspective. Thank you!
Thank you very much for these lessons, they have been an amazing help. I was wondering if the FCFF approach used for Boeing is usable for REITs as well? Or is a different method better suited for REITs? I've been struggling to value them as they invest from new debt + new shares rather than from the FCF.
Thank you Professor!
I have a question that might be silly, I notice we are calculating EBIT instead of EBITDA here in the valuation model, is that because the reinvestment figure formula has something built-in that added back the D&A somehow? I guess for some of the heavy asset modelled business D&A would have a big impact to the profit figure
Reinvestment = Cap ex - Depreciation + change in working capital. You are adding back depreciation. You cannot start a FCFF calculation with EBITDA ever. You will miss the tax benefit from depreciation.
@@AswathDamodaranonValuation Got it, thank you!
Thank you very much. I really appreciate your work
Amazing! Thank you so much for sharing!!!
This is very inspiring! I'm going to try and build the same thing. Do you build a template and simply update it every so often?
Thank you
Thank you for the updates, this is very useful
Professor, Is the key question resilience ? Buybacks and dividends return cash back to shareholders. Investment expand capacity and increase risk. But cash / liquidity on balance sheet has a "resilience" value ? (provided the management has credibility not to squander cash and allocate capital). How much cash is enough resilience ? (eg: revenue loss for a quarter or a year when markets are closed... like we do for home finances?)
Hi Professor Damodaran, although your blog post refers to a new set of spreads for the various credit ratings these don't appear to have found their way into your latest Ginzu spreadsheet linked to the blog. Will you be updating them? Many thanks & best regards, Rob
So you've done a few of these now right? Buybacks, Debt, Buffer. I'm very curious what the results would look like if you would to combine those factors into one equal weighted rank based formula.
tks!! professor
Professor, may I kindly ask what tools do you use to research your data please? Thank you for the insightful video, love how you start with picture and narrow in
S&p capital iq he mentions it in another comment on this video
Awesome content to navigate the market.
Thank you Professor.
How are you getting all this data? 37,000 companies?
Should be easy enough to get if you have access to a Bloomberg terminal.
Plus I'm pretty sure AD has an intern/student help him with the number crunching
I use S&P Capital IQ. It takes minutes to download the raw data and a few hours of working with them. It is easier than it looks. And Sumedh, I run a solo operation. I am way too much of a control freak to let someone else do it for me. One of my many weaknesses!
@@AswathDamodaranonValuation Hi AD, Thanks for the wonderful info. Quick Question : Have you found any major discrepancies in numbers in Reported IS/BS/CF vs the Capital IQ numbers? I'm using the same for extracting numbers like Net Working Capital or Total Debt and seems they are some way off the actuals. Do you conduct an Audit on the Cap IQ actuals and Earnings estimates vs Company reported info?
Thank you. Very informative.
Thank you Prof. Eagerly waiting for your Boeing and Zoom valuation video
Satish Vemuri The spread sheets are both on his website
$75 for ZOOM and $139 for BA
For those cyclical industries like auto industry and airlines, and those debt levels, I'm sure they will need to be bailed out every crisis.
Thank you so much for this useful video!
What stock screener would you recommend for the small investor?
Finviz
Amazing, thanks!
Great. Thank you!
Thank you!
Hi Aswath, could you provide us some insights on these rallies, how are people so optimistic and seeing the light @end of the tunnel that trump is showing. Where was this optimism just a month ago. suddenly the market is rallying like there wasn't any economic slowdown, nothing really happend.. while the markets in Asia are behaving as per their economic slowdown.. any help here?
Thanks prof! Are you invested in any Australian companies?
Even from a purely financial perspective, it makes little sense for the business to buyback stocks during strong bull markets. You are going to pay top dollar for your equity to drive up its price even further when growth is strong?
That is incredibly myopic and we all know why it happens. CEOs looking for big bonuses and then jumping ship ASAP. The shareholders get their payday and jump ship with him. It's not a philosophy that promotes financially healthy companies or long-term investing.
No, it would make more sense to just sit on the cash until either a good investment opportunity arises or a crisis arises and then you can buyback stock will the price is depressed to support equity during steep drawdowns.
Right on brother. Corps. Borrowed over 6 trillion over the last 10 years and used the majoriy to buyback stock. Now the fed has to buy corp bonds. Gee, how did that happen?
Yay and nay. If you have $X of income with no great investment opportunities, you're looking at three options, increase cash, dividends, or buybacks. Buybacks increase stockprice & reward some investors (as well as mgmt), dividends increase desirability of stock (theoretically at least) & rewards investors, and cash provides no investor upside while providing resilience in the face of crises.
My argument is not that these companies necessarily made poor micro decisions with buybacks, but that the macro environment is such that rewards buybacks to an outsized degree. In normal circumstances, everyone wins (investor, mgmt).
eliterun But isn’t that exactly why it is Myopic? Rather than sitting on cash, companies could invest in R&D or rather in buying smaller companies that have a great product or a product in development, or a great R&D team. That would be an investment in the long term. But these kind of investments are not rewarding in the near term to management that seeks rewards in the next 3-5 years because of their stock options. Think about Boeing actually investing in serious R&D and building a new plane model rather than working with 737 from the 1960’s and basically just changing the engines. They would avoided the two crashes and saved hundreds of lives and would have saved face and their stock price too and would have saved themselves from all the hate that they are receiving now.
The point is, don't borrow to buyback your own stock at inflated prices for the health of the company. They have lost trillions now and still owe the money.
Bill Bodge agreed. And I even agree to what you said earlier about buying when the stock prices are low and not when high. Infact company can raise capital by selling shares, but obviously this scenario will work against the owners of stock options and for buying back when prices are crashing, Capital is required, which they don’t have.
Great
Not true. It's the quality of the business not the buybacks. High quality companies with excessive buybacks did not do so bad as bad companies doing buybacks.