Value Investing

Articles

September 4, 2022
How to Calculate and Interpret the Single Index Model (SIM)

In this article, I will show you how to calculate and interpret the Single Index Model (SIM). The SIM claims that the returns on a stock are driven largely by its sensitivity and responsiveness to the returns on the market index. For investors interested in asset pricing, understanding the SIM is important, given that it […]

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August 15, 2022
How to Calculate and Interpret the Fama and French and Carhart Multifactor Models

In this article, I will show you how to calculate and interpret the Fama and French and Carhart multifactor models. In specific, this refers to the Fama and French Three Factor Model (FFTFM), the Carhart Four Factor Model (CFFM), and the Fama and French Five Factor Model (FFFFM). The purpose of this article is to […]

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July 25, 2022
How to Calculate and Interpret the Capital Asset Pricing Model (CAPM)

In this article, I will show you how to calculate and interpret the capital asset pricing model (CAPM). The CAPM is often used to calculate the cost of equity (re), which is common practice when calculating the weighted average cost of capital (WACC) for company projects or for stock market investors attempting to estimate the […]

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May 19, 2022
How to Calculate the Intrinsic Value of a Company Like Benjamin Graham

In this article, I will show you how to calculate the intrinsic value of a company like Benjamin Graham. Graham is widely known as the "father of value investing" and wrote The Intelligent Investor and Security Analysis, two very notable books on value investing. Graham also famously served as a mentor to Warren Buffett, who […]

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December 18, 2021
How to Value Companies Using the 10 Cap Stock Valuation Method

In this article, I will show you how to value companies using the 10 cap stock valuation method. This is a method of stock valuation that originated within real estate, and was created by Phil Town to value companies in the stock market. This valuation method is particularly useful for more established businesses and should […]

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April 27, 2021
How to Apply Comparable Company Analysis Using Valuation Multiples

In this article, I will show you how to apply comparable company analysis using valuation multiples, and will use this valuation method to value a real company in the stock market. Comparable company analysis (aka relative valuation or valuation using multiples) is the most popular valuation practice, where you're comparing a company to its peers […]

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March 17, 2021
How to Calculate and Interpret the Weighted Average Cost of Capital (WACC)

In this article, I will explain how to calculate and interpret the weighted average cost of capital (WACC), and will walk through a step-by-step example for a real publicly-traded company in the U.S. stock market. The WACC is a calculation of a firm's "cost of capital," which in relation to investors and analysts is the […]

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March 15, 2021
How to Calculate the Intrinsic Value of a Company Like Warren Buffett

In this article, I will show you how to calculate the intrinsic value of a company like Warren Buffett, using his approach to discounted cash flow (DCF) valuation. This will be accomplished by looking through the Berkshire Hathaway shareholder letters, the Berkshire Hathaway website, and from reading the transcripts of any speeches and interviews Buffett […]

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March 2, 2021
How to Tell if the Stock Market is Overvalued

In this article, I will discuss how investors can use various ratios, yields, indicators, and an understanding of the current state of the market to recognize if the stock market is overvalued, fairly-valued, or undervalued. In short, this process involves looking at the S&P 500 P/E Ratio, the Shiller P/E Ratio, the Buffett Indicator, the […]

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