1/2/2018 0 Comments A Clear MindThis winter break gave me an opportunity to clear my mind and actually be able to focus solely on my investing. Although I took a few days for myself to de-stress before the end of the first semester, this work allowed me to reset my focus and get some more insight into my original work.
One of the most beneficial tasks that I accomplished while we were on break was simply catching up on financial news that has been going on over the past few months. With the slew of projects and tests that are due in the weeks leading up to a long break, it is often difficult to find as much time to devote to investing as I would like. By catching up on financial news, however, I was able to confirm that IBP (Installed Building Products) is the company that I would like to value for my original work. The company is fairly straightforward and has stable growth, which make it a bit easier to calculate things like risk-free and discount rates. In addition, it is in an industry that is often easily overlooked and avoids the attention of the media, keeping the price a bit more stable. I also began to look more at the work that I will have to accomplish after finishing Aswath Damodaran’s Valuation course. Each week, Professor Damodaran posts a weekly challenge that focuses on one valuation skill. The first weekly challenge, however, was a basic valuation of a simple company where the valuation of the equity actually matched with the market price, leading to the same value whether you use the cost of capital or the cost of equity. When I do my valuation of IBP, however, I will get different numbers for these valuations because no company is ever completely priced to market. Therefore, I must learn how to determine which discount rate (the cost of capital or the cost of equity) is best applicable to IBP and then continue with my analysis of the company. As I continue moving through Professor Damodaran’s course and eventually move onto doing my own valuation of IBP, I know I will learn many lasting skills on the way. With the completion of my original work, I will have a physical product that shows my newly gained investing knowledge and begin to build the portfolio that will last for the rest of my life.
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