12/4/2017 0 Comments Not Everything Is As It SeemsThis week, I began taking Professor Aswath Damodaran’s Fall 2016 Valuation course as a part of my original work. Although this course is targeted at graduate level students, I wanted to challenge myself to think on their level and understand most of the material discussed. During the first two lectures (which were accessed through damodaran.com), I was surprisingly able to keep up with the pace of the class and learned an incredibly valuable lesson: controlling bias.
This concept of bias was heavily emphasized during these lectures. Professor Damodaran explained that every valuation has a certain level of bias that is inherent within the model, and this bias has a direct relationship with the amount that the creator is getting paid. Personally, I had never thought about the bias that I was encountering when reading things like analyst reports. Looking back on the work I have done, especially during my time at Yahoo, I realized how many flawed valuations and arguments that I simply dismissed as the truth. Moving forward, however, I will now be able to recognize bias in the reports of other people and adjust my own findings accordingly. My original work is also beginning to come together. After my interview with the team at Weitz Investments, I have been looking at investments in a completely new way. Before this interview, I was very attracted to large, complicated projects that I could not completely understand. I would always be able to point out the smoke, but not where the fire is. Now, I am looking at industries and companies that fly under the radar, such as Sally Beauty Supply. Right now, I am working on a valuation for Installed Building Products (IBP), one of the leading installers of insulation. I actually discovered this idea by simply looking around my house and asking myself where our drywall came from. After a quick internet search, I found IBP and may be on my way to the first purchase in my portfolio. As I continue with my original work, I hope to tap into my creativity and discover more interesting companies like IBP. Although drywall or insulation may not be as flashy as some other industries like technology, they can still be incredibly interesting and provide just as much return as any other company. With investments like these, I will be able to create a strong foundation for future portfolio work.
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