Aswath Damodaran Quotes

Growth requires reinvestment.

Einstein was right about relativity, but even he would have had a difficult time applying relative valuation in today's stock markets.

I am naturally drawn to numbers but one of the ironies of working with numbers is that the more I work with them, the more skeptical I become about purely number-driven arguments.

A firm can have value only if it ultimately delivers earnings.

Avoid companies that are cavalier about issuing new options to managers

The intrinsic value of an asset is determined by the cash flows you expect that asset to generate over its life and how uncertain you feel about these cash flows.

Success in investing comes not from being right but from being wrong less often than everyone else.

Growth firms get more of their value from investments that they expect to make in the future and less from investments already made.

In the intrinsic valuation chapter, we observed that the value of a firm is a function of three variables—its capacity to generate cash flows, its expected growth in these cash flows, and the uncertainty associated with these cash flows.

valuation that is not backed up by a story is both soulless and untrustworthy and that we remember stories better than spreadsheets.

Do not be afraid to make mistakes.

As I see it, the future of investing belongs to those who are flexible in their thinking and capable of moving easily from one segment of the market to another.

Greek theater, every story needs a beginning, a middle, and an end, and what keeps a story going is that the incidents within the story are linked together by cause and effect. For the story to have an effect, the protagonist should see a change in fortune over the course of the story. It is amazing how well that structure has held up through time.

pero si compras un activo financiero lo haces por los flujos de caja que esperas recibir.

we are increasingly using the Internet as an external hard drive for our memories.

When a company is paying out more in dividends, it is retaining less in earnings; the book value of equity increases by the retained earnings.

The right price: Great growth companies can be bad investments at the wrong price. While multiples such as PEG ratios have their limitations, use them (low PEG ratios) to screen for companies that are cheap.

Kahneman notes in his book on investor psychology, experience is not a very good teacher in investing and markets. 2 As human beings, we often extract the wrong lessons from past successes, don’t learn enough from our failures, and sometimes delude ourselves into remembering things that never happened.

in the hands of a skilled number cruncher, this bias can be hidden far better with numbers than with stories.

With all of the data and analytical tools at our disposal, you would not expect this, but a substantial proportion of business and investment decisions are still based on the average. I see investors and analysts contending that a stock is cheap because it trades at a PE that is lower than the sector average or that a company has too much debt because its debt ratio is higher than the average for the market. The average is not only a poor central measure on which to focus in distributions that are not symmetric, but it strikes me as a waste to not use the rest of the data.

In 2014, Aswath Damodaran, a professor of finance at NYU’s Stern School of Business, estimated that Uber was probably worth roughly $ 6 billion, based on its ability to ultimately win 10 percent of the global taxi market of $ 100 billion, or $ 10 billion. According to Uber’s own projections, in 2016 the company processed over $ 26 billion in payments. It’s safe to say that the $ 10 billion market was a serious underestimate, as the ease of use and lower cost of Uber and its competitors expanded the market for transportation-as-a-service.

We relate to and remember stories better than we do numbers, but storytelling can lead us into fantasyland quickly,