When it comes to valuing stocks, the most reliable valuations come from imaginative number crunchers and disciplined storytellers, says Aswath Damodaran.
Well-known blogger Joshua Brown, a.k.a The Reformed Broker, recently offered five reasons why Americans are fleeing the stock market. While he makes some sound points, he neglected to account for one key factor affecting stock market performance in the last few decades: the bubble in demand for equities created by Baby Boomers.
The recent public debuts of companies that have shown great revenue growth but little to no earnings, such as Groupon and LinkedIn, were reminiscent of the dot-com bubble of the late 1990s, and there is a natural temptation to get caught up in the hype. For this reason, it is as important as ever for analysts to rely on the fundamental principles of investing and valuation. And the discounted cash flow (DCF) model is a great place to start.
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