About this guide
Here, you'll find an introduction to some valuation tools and techniques. It is written for people who want to try valuing businesses but don't want to commit to reading a finance textbook yet.
This series will not make you an expert. If you like what you see here, I recommend buying a textbook on valuation next and reading it back to back.
Picking individual stocks can be very dangerous. Please be very careful with where you put your money.
Read these articles in the recommended order below.
Key Concepts
1. How to Make Better Investment Decisions With The “Triangulation Principle”
A health check-up inspects multiple body parts so that you can have a full understanding of how you’re doing. Following the Triangulation Principle will help you do the same for your investments.
2. New Investors Try to Predict Stock Prices. The Best Investors Do This Instead.
One common misconception about Value Investing is that investments have only one "fair value". This article describes how investors really make decisions.
Valuation
1. How to Value Your First Stock In 1 Hour or Less – No Finance Knowledge Required!
This article describes the "PE Ratio Comparison" technique. This is one of the easiest valuation techniques, making it perfect for your first valuation.
2. How to Estimate A Company’s Future Growth
Knowing how to estimate a company's future growth rate is important for applying the next valuation technique in this series. This article introduces you to how growth works, and how to calculate it.
3. A Simple Valuation Technique From a Superinvestor Who Beat Warren Buffett’s Track Record
Peter Lynch averaged an annual return of 29% per year, beating Warren Buffett’s average of around 20% per year. This article describes a simple valuation technique he taught that uses PE ratios and a company's projected growth rate.
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