Valuation of stocks -- Vitaliy N. Katsenelson

 

Q-G-V

 

Quality --

• competitive advantage
• Management
• Predictable Earnings
• Strong Balance Sheet
• Significance of Free Cash Flows
• High Return of Capital

Growth --

• Sources of earning growth and dividends -- the past
• Future engines of growth
• Dividends

Valuation --

• DCF models
• Relative valuation versus absolute valuation
• False precision
• Margin of Safety
• Absolute P/E
• P/E compression

Valuation and Growth are joint at the hip -- Warren Buffet

Quality makes sure the company is still around to collect the fruit of its work.

 

 

Good quality and good growth but expensive valuation --- great company does not mean great stock

 

Good quality company with reasonable valuation but low on growth -- increase Margin of Safety

 

Good growth story with reasonable valuation but low on quality -- the MOST dangerous kind of stock to own