If you look at academic studies, you can see that stock prices are most closely correlated with cash flow. It's such a straightforward number. Cash flow is what will drive shareholder returns.
Investment students need only two well-taught courses - How to Value a Business and How to Think About Market Prices
The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.
The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.
My career in academic research has not been involved with active management of securities. I've tried to understand risk-and-return relationships; also the pricing of derivative securities.
It's pretty shocking that the guys in Europe who cover traditional media will cover Google, whereas in the U.S., there are five different equity analysts that will cover the internet universe.
Before you even consider making a value bet, try to determine if the bet will have any value at all. Attempt to put your opponent on a hand that he'd likely call a bet with on the river. To do this, you'll have to mentally play back the details of the hand. Think about your opponent's playing tendencies.
It's our contention that equity may be in the money, depending on where the liabilities lie.
When I started out as an equity analyst, we had no securitization data. We relied on company data.
The ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase.
Mediobanca is undervalued but less undervalued than other banks.
Internally, when we manage portfolios, we figure out what works in large cap, what works in mid cap, what works in small cap. Generally speaking, large cap stocks want earning stability, strong cash flow, margin expansion.
After 'Don't Play Us Cheap,' I got very busy with theater and Wall Street.
Picking the right stocks is one of the hardest parts of investing, and every night on Mad Money, I try to take some of that burden off your shoulders.
Internet players have successfully addressed the all-in play from a mathematical perspective. For example, it's fairly common to see a net player move all-in over the top from the big blind with a hand like K-Q when they have less than twenty big blinds remaining. And for good reason - it works!
