1
00:00:02,400 --> 00:00:07,840
Speaker 1: Bloomberg Audio Studios, podcasts, radio news because.

2
00:00:07,520 --> 00:00:08,480
Speaker 2: I Gotta have fa.

3
00:00:18,840 --> 00:00:22,680
Speaker 1: Oscar Wilde once described a cynic as a man who

4
00:00:22,720 --> 00:00:26,200
Speaker 1: knows the price of everything, but the value of nothing.

5
00:00:27,040 --> 00:00:32,360
Speaker 1: Nowhere is understanding value more important than in the stock market. Sure,

6
00:00:32,479 --> 00:00:37,640
Speaker 1: prices get quoted every second, every tick, but value that's

7
00:00:37,680 --> 00:00:41,920
Speaker 1: a much more challenging problem. Whether you're buying broad indices

8
00:00:42,120 --> 00:00:46,640
Speaker 1: or purchasing specific stocks, it pays to not be a

9
00:00:46,720 --> 00:00:52,000
Speaker 1: cynic and understand both price and value of your investments.

10
00:00:52,640 --> 00:00:55,920
Speaker 1: I'm Barry Ritolts, and on today's edition of At the Money,

11
00:00:56,400 --> 00:00:59,760
Speaker 1: we're going to explain how to become more savvy about

12
00:01:00,080 --> 00:01:04,319
Speaker 1: understanding equity values. The value you pay for your investment

13
00:01:04,720 --> 00:01:09,160
Speaker 1: has an outsized impact on your long term returns. To

14
00:01:09,200 --> 00:01:11,160
Speaker 1: help us unpack all of this and what it means

15
00:01:11,200 --> 00:01:15,720
Speaker 1: for your portfolio, let's bring in Professor Aswath Damaduran of

16
00:01:15,920 --> 00:01:19,679
Speaker 1: NYU's School of Business. He is often referred to as

17
00:01:19,720 --> 00:01:23,600
Speaker 1: the Dean of valuation for his extensive work in the area.

18
00:01:23,959 --> 00:01:28,880
Speaker 1: He's written numerous books on the subject, including Damadoran on Valuation,

19
00:01:29,800 --> 00:01:35,160
Speaker 1: Narrative and Numbers, and the textbook Investment Valuation Tools and

20
00:01:35,240 --> 00:01:40,160
Speaker 1: Techniques for determining the value of any asset. So, Professor,

21
00:01:40,280 --> 00:01:44,200
Speaker 1: let's just start with the basic question, why are valuations

22
00:01:44,240 --> 00:01:46,720
Speaker 1: so important when it comes to equities.

23
00:01:47,040 --> 00:01:49,120
Speaker 3: I'm going to give you a cynical answer. They're not

24
00:01:49,160 --> 00:01:52,440
Speaker 3: important if you're a trader. Traders live on pricing. In

25
00:01:52,560 --> 00:01:54,600
Speaker 3: the essence of pricing is you buy at a low price,

26
00:01:54,600 --> 00:01:56,520
Speaker 3: you set at a high price, and it doesn't really

27
00:01:56,560 --> 00:01:59,040
Speaker 3: matter why the price changes if you get the direction dright,

28
00:02:00,120 --> 00:02:03,000
Speaker 3: value matters if you're an investor. To me, the definition

29
00:02:03,040 --> 00:02:06,480
Speaker 3: of an investor is you buy something for less than.

30
00:02:06,360 --> 00:02:07,000
Speaker 2: What it's worth.

31
00:02:07,040 --> 00:02:09,200
Speaker 3: And the essence of values, you're trying to estimate what

32
00:02:09,320 --> 00:02:12,840
Speaker 3: something is worth. But most as I said, it depends

33
00:02:12,880 --> 00:02:15,040
Speaker 3: on the philosophy you bring in. Are you an investor

34
00:02:15,120 --> 00:02:17,280
Speaker 3: or your trader, because that's going to dry whether value

35
00:02:17,280 --> 00:02:17,840
Speaker 3: matters to you.

36
00:02:18,440 --> 00:02:23,120
Speaker 1: So let's talk about identifying that intrinsic value of what

37
00:02:23,240 --> 00:02:26,720
Speaker 1: something is worth with any specific company. How can you

38
00:02:26,800 --> 00:02:28,680
Speaker 1: determine that valuation.

39
00:02:29,520 --> 00:02:30,760
Speaker 2: It's as old as time.

40
00:02:30,840 --> 00:02:34,040
Speaker 3: That Venetian glass maker is sold at business in the

41
00:02:34,040 --> 00:02:37,160
Speaker 3: Middle Ages. Probably sold it to somebody bought it because

42
00:02:37,639 --> 00:02:40,760
Speaker 3: of the cash flows he generated, the risk in those

43
00:02:40,800 --> 00:02:43,040
Speaker 3: cash flows, and how much those cash flows are going

44
00:02:43,080 --> 00:02:44,960
Speaker 3: to grow. It's cash flows, growth and risk. That's the

45
00:02:45,120 --> 00:02:48,600
Speaker 3: essence of value. That's always been true. We act like

46
00:02:48,639 --> 00:02:52,720
Speaker 3: we invented valuation in the last century in finance because

47
00:02:52,720 --> 00:02:55,120
Speaker 3: we came up with all these neat little models and

48
00:02:55,240 --> 00:02:58,120
Speaker 3: metrics to measure risk and bring it into what you

49
00:02:58,200 --> 00:03:01,560
Speaker 3: need to make. But always been driven by cash flows,

50
00:03:01,560 --> 00:03:04,240
Speaker 3: growth and risk. And how you get to that value

51
00:03:05,200 --> 00:03:09,360
Speaker 3: can come from different pathways. I use intrinsic valuation, you know,

52
00:03:10,440 --> 00:03:14,680
Speaker 3: in that sense as capturing anybody who thinks about those fundamentals.

53
00:03:14,760 --> 00:03:19,520
Speaker 1: So let's dive into that intrinsic valuation based on cash flow,

54
00:03:20,080 --> 00:03:23,680
Speaker 1: growth and risk. What different ways are there to measure

55
00:03:23,760 --> 00:03:26,880
Speaker 1: the fundamental value of a company? And how do these

56
00:03:26,960 --> 00:03:30,200
Speaker 1: different valuations reveal intrinsic value?

57
00:03:30,280 --> 00:03:33,120
Speaker 3: I mean, ultimately, cash flows, growth and risk are not

58
00:03:33,240 --> 00:03:35,520
Speaker 3: going to be different for different people. The way we

59
00:03:35,640 --> 00:03:38,320
Speaker 3: think about risk, though, can differ depending on who you

60
00:03:38,360 --> 00:03:40,560
Speaker 3: are as an investor and what do you think matters.

61
00:03:40,880 --> 00:03:42,040
Speaker 2: I mean, I'll give you an example.

62
00:03:42,120 --> 00:03:44,960
Speaker 3: In traditional finance, we think about risk by looking at

63
00:03:44,960 --> 00:03:48,080
Speaker 3: how prices move for a stock relative to the market.

64
00:03:48,840 --> 00:03:50,040
Speaker 2: But there are intrinsic value.

65
00:03:50,040 --> 00:03:52,560
Speaker 3: People argue that true measure of risk is what happens

66
00:03:52,560 --> 00:03:56,240
Speaker 3: to your earnings. Your revenues are operating metrics. So even

67
00:03:56,320 --> 00:03:58,760
Speaker 3: within people who believe in intrinsic value, we can have

68
00:03:58,880 --> 00:04:02,600
Speaker 3: disagreements about how to measure risk, what is the right

69
00:04:02,680 --> 00:04:06,080
Speaker 3: cash flow to look at, and what's the growth rate

70
00:04:06,160 --> 00:04:09,080
Speaker 3: that you think about over what periods. So while we

71
00:04:09,200 --> 00:04:11,840
Speaker 3: might have twenty people in a room, all of whom

72
00:04:12,080 --> 00:04:14,520
Speaker 3: buy into intrinsic value, we can come up with twenty

73
00:04:14,560 --> 00:04:17,800
Speaker 3: different estimates of intrinsic value for the same company at

74
00:04:17,800 --> 00:04:18,920
Speaker 3: the same point in time.

75
00:04:19,440 --> 00:04:22,960
Speaker 1: So we always hear about price to sales, price to book,

76
00:04:23,040 --> 00:04:26,400
Speaker 1: price to earnings. Are these all that different, They're just

77
00:04:26,560 --> 00:04:30,800
Speaker 1: variations on fundamentals, or are they very different ways of

78
00:04:30,839 --> 00:04:32,120
Speaker 1: looking at the same company.

79
00:04:32,720 --> 00:04:35,479
Speaker 3: Philosophically, they're very different because when you compute the price

80
00:04:35,520 --> 00:04:38,560
Speaker 3: earnings or the ev Tabidov price to book for a company,

81
00:04:38,560 --> 00:04:41,320
Speaker 3: what you do is you compare to other companies out there,

82
00:04:41,360 --> 00:04:44,000
Speaker 3: and you make a judgment and saying, in this company

83
00:04:44,080 --> 00:04:47,599
Speaker 3: trades at ten times earnings, other companies like it, and

84
00:04:47,640 --> 00:04:49,919
Speaker 3: I'm going to put quotes on like it trade at

85
00:04:49,960 --> 00:04:53,640
Speaker 3: fifteen times earnings. Therefore a cheap that's a pricing judgment.

86
00:04:53,680 --> 00:04:57,200
Speaker 3: There's nothing value in here, there's no intrinsic value judgment.

87
00:04:57,240 --> 00:05:00,000
Speaker 3: That's why all of seal side equity research, i would argue,

88
00:05:00,760 --> 00:05:01,640
Speaker 3: is all about pricing.

89
00:05:01,680 --> 00:05:02,880
Speaker 2: It's not about valuation.

90
00:05:03,400 --> 00:05:06,080
Speaker 3: Nothing wrong with it, but we should be honest about

91
00:05:06,120 --> 00:05:09,400
Speaker 3: what we're doing. So when you use ratios, it's because

92
00:05:09,440 --> 00:05:12,000
Speaker 3: you want to find something cheap by comparing it to

93
00:05:12,200 --> 00:05:15,479
Speaker 3: other things out there that are being traded right now,

94
00:05:15,480 --> 00:05:17,040
Speaker 3: and you're looking at what other people are.

95
00:05:16,880 --> 00:05:20,520
Speaker 1: Paying, so you're looking at price. When people look at

96
00:05:20,560 --> 00:05:24,400
Speaker 1: stocks that way, they're looking at price and relative valuation,

97
00:05:24,640 --> 00:05:28,200
Speaker 1: non intrinsic value. Let's talk about some of the things

98
00:05:28,240 --> 00:05:33,080
Speaker 1: you've explained in your books. Valuation requires a deeper understanding

99
00:05:33,120 --> 00:05:36,280
Speaker 1: of the business, including how it makes money and its

100
00:05:36,320 --> 00:05:40,000
Speaker 1: future prospects. Give us a little more detail on that.

101
00:05:40,760 --> 00:05:42,920
Speaker 3: I'll give you an example, and it's a personal example.

102
00:05:43,839 --> 00:05:46,200
Speaker 3: I bought in Verdia purely by luck.

103
00:05:45,960 --> 00:05:48,840
Speaker 2: In two thousand and eighty. I didn't see AI coming,

104
00:05:48,920 --> 00:05:49,760
Speaker 2: none of this stuff.

105
00:05:49,800 --> 00:05:53,839
Speaker 3: So sometimes your best investments happened by accident. So last

106
00:05:53,920 --> 00:05:57,440
Speaker 3: year I had to revalue in Vidio for a simple reason.

107
00:05:57,839 --> 00:06:00,240
Speaker 3: I mean I bought it at twenty seven dollars per sit. Yeah,

108
00:06:00,240 --> 00:06:03,320
Speaker 3: the stock was trading at eight hundred dollars per share,

109
00:06:03,680 --> 00:06:05,520
Speaker 3: and I had to decide is it time to leave?

110
00:06:06,080 --> 00:06:08,200
Speaker 3: So as I sat down to value in Vidia, I

111
00:06:08,279 --> 00:06:10,960
Speaker 3: started with a presumption that was a computer check company

112
00:06:10,960 --> 00:06:13,280
Speaker 3: that had made chips and sold them, and I had

113
00:06:13,240 --> 00:06:15,000
Speaker 3: to estimate cash flows based on that.

114
00:06:15,720 --> 00:06:17,560
Speaker 2: It's only as I started.

115
00:06:17,200 --> 00:06:19,640
Speaker 3: Digging a little deeper that I realized that they're not

116
00:06:19,720 --> 00:06:23,680
Speaker 3: a chip maker, They're a chip designer. Every Nvidia chip

117
00:06:23,760 --> 00:06:27,400
Speaker 3: is made by TSMC, which basically changes the way you

118
00:06:27,480 --> 00:06:30,520
Speaker 3: think about the business. If you're doing pricing, you might

119
00:06:30,560 --> 00:06:32,800
Speaker 3: be able to gloss over it, it doesn't matter.

120
00:06:32,560 --> 00:06:33,200
Speaker 2: That they do it.

121
00:06:33,680 --> 00:06:36,279
Speaker 3: But if we're doing intrinsic valuation, because I have to

122
00:06:36,400 --> 00:06:39,480
Speaker 3: estimate cash flows, I have to think about what is

123
00:06:39,560 --> 00:06:42,640
Speaker 3: it that they spend to create these revenues, and that

124
00:06:42,680 --> 00:06:46,440
Speaker 3: requires an understanding of how they conduct their business. I

125
00:06:46,440 --> 00:06:49,000
Speaker 3: mean Warren Buffett and a famous saying that he doesn't

126
00:06:49,040 --> 00:06:52,240
Speaker 3: buy stocks, he buys shares of businesses. That, to me,

127
00:06:52,360 --> 00:06:55,560
Speaker 3: in essence, is what you're doing in intrinsic valuation. You're

128
00:06:55,560 --> 00:06:57,920
Speaker 3: not buying a share of Apple or a share of Amazon.

129
00:06:58,000 --> 00:07:01,240
Speaker 3: You're buying a slice of those businesses is that's what

130
00:07:01,240 --> 00:07:04,039
Speaker 3: you're doing. You better understand what you're buying before you

131
00:07:04,040 --> 00:07:04,640
Speaker 3: pay a price.

132
00:07:05,279 --> 00:07:08,680
Speaker 1: So can we apply the same theory of valuation to

133
00:07:08,880 --> 00:07:12,320
Speaker 1: broad indices as opposed to just individual stocks.

134
00:07:13,160 --> 00:07:15,640
Speaker 3: Absolutely, I mean it's cash flows, growth and risk drive

135
00:07:15,680 --> 00:07:18,600
Speaker 3: the value of Invidia. Cash flows, growth and risk, because

136
00:07:18,600 --> 00:07:20,640
Speaker 3: what drives the value the S and P five hundred

137
00:07:20,760 --> 00:07:23,800
Speaker 3: or the Nasdaq. In fact, that's the process I use

138
00:07:23,880 --> 00:07:25,920
Speaker 3: at the start of every month to come up with

139
00:07:25,960 --> 00:07:29,120
Speaker 3: an estimate or what investors are pricing in the S

140
00:07:29,160 --> 00:07:31,640
Speaker 3: and P five hundred and what they can expect to

141
00:07:31,680 --> 00:07:34,640
Speaker 3: earn given the cash flow. It's a very intrinsic value

142
00:07:34,720 --> 00:07:37,200
Speaker 3: view of what can you expect to make as a

143
00:07:37,320 --> 00:07:39,000
Speaker 3: rate of return on an index?

144
00:07:39,840 --> 00:07:45,200
Speaker 1: So that raises, you know, the real important question, what

145
00:07:45,240 --> 00:07:49,680
Speaker 1: do these measures of evaluations mean for future expected returns?

146
00:07:50,120 --> 00:07:52,320
Speaker 3: The more you pay for something, let's cut away from

147
00:07:52,400 --> 00:07:57,200
Speaker 3: all of the noise in this process. The more you

148
00:07:57,280 --> 00:08:01,280
Speaker 3: pay for something upfront, the lower your expected returns are

149
00:08:01,280 --> 00:08:01,680
Speaker 3: going to be.

150
00:08:01,680 --> 00:08:02,280
Speaker 2: Because if you.

151
00:08:02,240 --> 00:08:06,480
Speaker 3: Pay more upfront, and that's just common sense. So when

152
00:08:06,520 --> 00:08:09,080
Speaker 3: you buy the S and P five hundred at fifty

153
00:08:09,160 --> 00:08:12,440
Speaker 3: three hundred, you can expect to earn a lower return

154
00:08:12,480 --> 00:08:13,280
Speaker 3: than if you bought it.

155
00:08:13,240 --> 00:08:14,640
Speaker 2: At fifty one hundred.

156
00:08:15,160 --> 00:08:18,440
Speaker 3: So if you bought it last week, your expected denerves

157
00:08:18,480 --> 00:08:21,560
Speaker 3: lower than if you bought it today. And that's at

158
00:08:21,640 --> 00:08:24,760
Speaker 3: the basis of intrinsic value. It's about paying the right

159
00:08:24,920 --> 00:08:26,880
Speaker 3: price for something upfront.

160
00:08:27,520 --> 00:08:29,200
Speaker 2: Is the most critical decision you make.

161
00:08:29,400 --> 00:08:34,520
Speaker 1: So you consistently in all your books emphasize that value

162
00:08:34,920 --> 00:08:38,840
Speaker 1: is not price. So how should investors think about the

163
00:08:38,880 --> 00:08:43,960
Speaker 1: difference between the quoted fluctuated price we see every day,

164
00:08:44,720 --> 00:08:48,240
Speaker 1: the quoted fluctuating price that we see every moment on

165
00:08:48,320 --> 00:08:51,280
Speaker 1: the market, and that deep intrinsic value.

166
00:08:51,600 --> 00:08:54,880
Speaker 3: Recognize that are two different processes. Nothing makes one better

167
00:08:54,920 --> 00:08:58,280
Speaker 3: than the other. Different processes. Values driven by changes in

168
00:08:58,320 --> 00:09:02,800
Speaker 3: your earnings, cash flows, growth, risk, and that's captured by

169
00:09:02,880 --> 00:09:06,000
Speaker 3: changing value over time. So I'm not saying intrinsic value

170
00:09:06,000 --> 00:09:10,520
Speaker 3: somehow stable stagnant number. The intrinsic value in radio doubled

171
00:09:10,559 --> 00:09:13,920
Speaker 3: because of its entry into AI. Intrinsic value can change.

172
00:09:14,280 --> 00:09:18,120
Speaker 3: Price is driven by demand and supply, driven by mood

173
00:09:18,120 --> 00:09:21,280
Speaker 3: and momentum, and I think one of the best indicators

174
00:09:21,280 --> 00:09:23,040
Speaker 3: you can take a mood and momentum is when the

175
00:09:23,080 --> 00:09:24,520
Speaker 3: momentum is good.

176
00:09:25,240 --> 00:09:26,440
Speaker 2: All news is good news.

177
00:09:26,840 --> 00:09:31,119
Speaker 3: In fact, there's a whole segment of finance called behavioral finance,

178
00:09:31,720 --> 00:09:34,719
Speaker 3: and behavioral finance tries to explain why price can not

179
00:09:34,880 --> 00:09:39,640
Speaker 3: only deviate from value but stay different for long periods.

180
00:09:40,080 --> 00:09:43,280
Speaker 3: There is this inherent belief that value investors have that

181
00:09:43,320 --> 00:09:45,880
Speaker 3: price will move towards value and it will happen quickly.

182
00:09:46,679 --> 00:09:49,520
Speaker 3: That's not true. Price can deviate from value. It can

183
00:09:49,640 --> 00:09:53,160
Speaker 3: stay separated from value for long periods, which means, if

184
00:09:53,160 --> 00:09:56,120
Speaker 3: you're an intrinsic value investor, you're going to get incredibly

185
00:09:56,160 --> 00:09:58,720
Speaker 3: frustrated because you think you got it right, but you

186
00:09:58,800 --> 00:09:59,640
Speaker 3: keep losing money.

187
00:10:00,080 --> 00:10:03,600
Speaker 1: So you're referring to mean reversion. The expectation is that

188
00:10:03,760 --> 00:10:08,000
Speaker 1: pricey things eventually be come back down to fair value,

189
00:10:08,280 --> 00:10:12,600
Speaker 1: and inexpensive things will eventually be recognized and return to

190
00:10:12,679 --> 00:10:16,079
Speaker 1: fair value. How long does this process take? Is it

191
00:10:16,200 --> 00:10:20,160
Speaker 1: guaranteed to happen? Does that mean reversion always occur?

192
00:10:21,360 --> 00:10:24,920
Speaker 3: It's not just mean reversion, it's assumption that values what

193
00:10:25,040 --> 00:10:28,880
Speaker 3: matters in the long term. I mean that's almost I

194
00:10:29,360 --> 00:10:31,920
Speaker 3: mean when I start my valuation class, I started the

195
00:10:32,000 --> 00:10:34,400
Speaker 3: question do you have faith? My students look at me say,

196
00:10:34,520 --> 00:10:35,560
Speaker 3: it's evaluation class.

197
00:10:35,559 --> 00:10:36,320
Speaker 2: What are you talking about?

198
00:10:36,400 --> 00:10:39,199
Speaker 3: I said, the essence of investing is faith. Faith that

199
00:10:39,240 --> 00:10:43,160
Speaker 3: your estimated value is the right value, and faith that

200
00:10:43,240 --> 00:10:46,520
Speaker 3: the price will move to value. And the essence of faith.

201
00:10:46,600 --> 00:10:48,760
Speaker 3: If you asked me to prove it, and if you

202
00:10:48,800 --> 00:10:51,000
Speaker 3: told me, tell me what will cause it to happen,

203
00:10:51,040 --> 00:10:53,600
Speaker 3: my answer is, I don't know. It's a mystery. I mean,

204
00:10:53,640 --> 00:10:55,640
Speaker 3: it's like going to church and going up to your

205
00:10:55,679 --> 00:10:58,240
Speaker 3: pastor or your rabbi and saying, can you give me.

206
00:10:58,160 --> 00:10:59,600
Speaker 2: Some proof that God exists?

207
00:10:59,640 --> 00:11:02,400
Speaker 3: I keep coming back every you know, every week because

208
00:11:02,520 --> 00:11:06,200
Speaker 3: I and if that rabbi, a priest or you know,

209
00:11:06,320 --> 00:11:08,600
Speaker 3: is telling you the truth, they should say look enough.

210
00:11:08,720 --> 00:11:11,320
Speaker 2: I can't give you that proof. It's faith. And I

211
00:11:11,320 --> 00:11:13,559
Speaker 2: think that's what makes investing.

212
00:11:13,200 --> 00:11:16,920
Speaker 3: So difficult is it's driven by faith rather than by proof.

213
00:11:16,960 --> 00:11:19,280
Speaker 3: So if you ask me, you know, if I bought

214
00:11:19,280 --> 00:11:22,360
Speaker 3: something undervalued, am I guaranteed to make money in the

215
00:11:22,400 --> 00:11:22,920
Speaker 3: long term?

216
00:11:22,960 --> 00:11:25,320
Speaker 2: Absolutely not. And you have to be okay with it.

217
00:11:25,320 --> 00:11:28,600
Speaker 3: If you're not okay with it buying a text file,

218
00:11:29,040 --> 00:11:32,480
Speaker 3: don't invest or be a trader. The essence of investing

219
00:11:32,520 --> 00:11:35,480
Speaker 3: is you can do everything right and have nothing to

220
00:11:35,520 --> 00:11:37,160
Speaker 3: show for it, and you have to be okay with that.

221
00:11:37,480 --> 00:11:41,680
Speaker 1: Wow, So, professor, bottom line it for us when we

222
00:11:41,760 --> 00:11:45,920
Speaker 1: think about valuation, when investors look at equities, what should

223
00:11:45,920 --> 00:11:49,960
Speaker 1: be foremost in their minds before deploying capital.

224
00:11:51,520 --> 00:11:54,400
Speaker 2: Leys be honest with yourself. Now, what is the game

225
00:11:54,440 --> 00:11:54,960
Speaker 2: you're playing?

226
00:11:54,960 --> 00:11:57,840
Speaker 3: If you're playing the trading game, don't lie to yourself

227
00:11:57,880 --> 00:12:00,840
Speaker 3: about caring about fundamentals and earnings and cash flows.

228
00:12:01,080 --> 00:12:02,160
Speaker 2: Just play the trading game.

229
00:12:02,600 --> 00:12:05,680
Speaker 3: Look at charts, look at technical indicators, look at mood

230
00:12:05,720 --> 00:12:08,600
Speaker 3: and momentum, because that's what you're playing. If you want

231
00:12:08,640 --> 00:12:10,760
Speaker 3: to be an investor, you need to do your homework.

232
00:12:10,800 --> 00:12:13,760
Speaker 3: You can't hide behind the fact of I've never done

233
00:12:13,800 --> 00:12:17,559
Speaker 3: an accounting or evaluation closet or understand these financial statements.

234
00:12:17,559 --> 00:12:19,560
Speaker 2: The essence of investing.

235
00:12:19,720 --> 00:12:22,040
Speaker 3: Is you've got to be able to look through those

236
00:12:22,040 --> 00:12:25,079
Speaker 3: financial statements and be able to gauge the value of

237
00:12:25,080 --> 00:12:27,760
Speaker 3: a company. You might not want to use the full

238
00:12:27,880 --> 00:12:31,320
Speaker 3: technology of intrinsic valuation, but you need to start thinking

239
00:12:31,400 --> 00:12:34,680
Speaker 3: about businesses and value in a much more in a

240
00:12:34,760 --> 00:12:36,839
Speaker 3: much deeper way than you're doing right now.

241
00:12:37,320 --> 00:12:39,280
Speaker 2: If that's not your thing, that's fine.

242
00:12:39,440 --> 00:12:41,599
Speaker 3: There are lots of people who get richest traders and

243
00:12:41,600 --> 00:12:45,400
Speaker 3: there's nothing wrong with trading. Just play that game well.

244
00:12:45,600 --> 00:12:48,520
Speaker 1: So to wrap up, investors who have a long term

245
00:12:48,600 --> 00:12:54,040
Speaker 1: time horizon should be very aware of the variations in valuations.

246
00:12:54,640 --> 00:12:57,440
Speaker 1: The more you pay for a given stock or a

247
00:12:57,480 --> 00:13:01,959
Speaker 1: given market index, the lower you future expected returns are.

248
00:13:02,920 --> 00:13:06,160
Speaker 1: Understand that there are no guarantees in the market, and

249
00:13:06,360 --> 00:13:10,120
Speaker 1: merely buying cheap stocks is no guarantee that you're gonna

250
00:13:10,160 --> 00:13:14,679
Speaker 1: outperform or even market perform in the future. I'm Barry

251
00:13:14,720 --> 00:13:33,720
Speaker 1: Retults and this is Bloomberg's at the Money