Good day everyone.
This is my post in this forum and I am lucky to have ended up bumping into this site. I enjoy learning from here. Valuation is really an ART is what I feel and based on the mental model one develop (each might value a business differently) our optimism, pessimism, realism everything comes to picture here. I feel it is more of ART because most of the time it cannot be a real single figure (else investing would have been easy with few mathematical formulas)
Note : I feel in the long run AI based systems will come up, which will churn through the web to get data on a company and will start provide probability of the business shape in future. I think the probability factor is the one that makes it an ART rather than pure mathematics.
Intelligent fanaticism of the promoter/ promoters has great ability to unlock and take the business to different levels (Very much time consuming to understand) - especially when not enough public details are not available. I think investing should be a passion too to succeed , which makes one to go behind it and uncover (Vast majority not able to it)
When I started in stock market, it was due to the assumption that it is a quick way to make profit (One of my friend told that assumption means - making ass out of u and me). Grace of the nature I did not make a loss and was able to keep my overall return 1-2% above inflation (largely due to luck) rather than really trying to understand the business or promoters. I still do not understand most of the business how they operate and not have the wisdom like Utpal seth to visualize the RARE events. I am trying to improve on that and at the same time I cannot afford to make a relative negative return on my capital. This is what I have in my mind till the time I have comfortable conviction to spot business run by intelligent fanatic (early in its stage)
- Grow the capital using proven business run by intelligent people
- Have a rough idea about the business (how it will be 5-10-15-20 years period)
- Buy the stock at a fair price (keeping in mind the return I expect)
(Note : This thread by Vishal came just in when I was thinking on the valuation part - https://www.safalniveshak.com/simple-pe-valuation-model/ (lucky again))
I tried doing an exercise using Asian paints (One stock that I own already - not a recommendation though) . Below excel helps me figure out the entry price I should get to generate the return I expect from stock. Looks like it will be relatively safe to expect the return to be relatively correct if the duration gets longer (Need to choose companies that can stand another 10 - 20 years). Hopefully the companies that I select will stand that long! (Almost all of them are proven ones)
Now I need to make sure I do not over pay (do not have wisdom to figure out real intrinsic value - I feel it is not just numbers). I am hopeful that this excel will save me from over paying.
Any thoughts from great minds here to improve my thought process?