In this highly requested video, I'll show you how to easily tell if a stock is expensive or cheap using a Discounted Cash Flow, or DCF, analysis. You'll learn why knowing a stock’s true value matters if you're aiming for better returns, and I’ll clear up the difference between price and value. I’ll walk you through when DCFs make sense—and when they don’t—plus share key tips and common mistakes to watch out for. I’ll also explain why waiting to buy a stock when it’s cheap (or sell when it’s overpriced) isn’t the same thing as trying to time the market. Finally, I’ll show my favorite online tool that can visually show you if a stock is expensive or cheap, saving you a lot of time that manual DCFs can take, though I still encourage you to learn how to do them.
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Timestamps:
0:00 intro
0:45 Simple DCF-like example
1:40 Time value of money
1:50 Discount Rate (WACC)
4:15 Margin of Safety
5:11 Terminal Value
8:03 Market Price vs Intrinsic Value
8:24 DCF Steps Summary
9:13 Market Timing
10:45 Disclaimer about DCFs
11:25 When DCFs don’t make sense
13:07 When DCFs do make sense
13:27 Procter & Gamble DCF example estimate
16:49 Converting DCF value into fair share price
18:01 FAST Graphs example
18:45 Ending thoughts
20:07 Buffett: Price is what you pay, value is what you get.
20:44 Shoutouts & pitches
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Investing Books to read (Amazon affiliate links):
The Intelligent Investor ➜ https://amzn.to/2WPwgtj
One Up on Wall Street ➜ https://amzn.to/2YTDAXt
Rich Dad, Poor Dad ➜ https://amzn.to/2SUCwOZ
The Richest Man in Babylon ➜ https://amzn.to/2SUHStw
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing ➜ https://amzn.to/2YUgjo4
The Bogleheads' Guide to Investing ➜ https://amzn.to/2STECPp
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Disclaimer: I am not a financial adviser. These videos are for entertainment, inspiration, and educational purposes only. Investing of any kind involves risk. I am only sharing my opinion with no guarantee of gains or losses on investments. Please consult an appropriate adviser and do your own research before making any decisions on anything. I am not responsible or liable for any actions you take. The data shared may be inaccurate.
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