go beyond techniques & develop fundamentals needed to excel in business investing

Financial concepts

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NPV, WACC, CAPM

Net Present Value = Cash flow / (1+i)^t - initial investment


Weighted average cost of capital = %debt * cost of debt (interest rate)  + % equity * cost of equity (computed using the CAPM formula)


Capital asset pricing model = Rf + b *(Rm-Rf) or the expected risk free rate (30 year bond rate + beta of stock * (expected market return - expected risk free rate).

TVM

Time Value of money - compounding and discounting based on timing of cash flows and required returns  

Today's dollars * (1 + rate of return)^t = FV

Relative valuation vs intrinsic valuation

What is the market paying for similar business?

DCF Discounted cash flow models
DDM Dividend Discount Models


Fundamental vs technical Analysis

Investors should prefer companies with increasing demand for the products and services (fundamental analysis) as well as the stock of the corporation (technical analysis)


Fundamental analysis requires financial ratios to be computed from financial statements and examining trends over time.


Technical analysis uses statistical processes to determine short term reversion to the mean as well as support and resistance levels. 


Fundamental investors are often ling term investors. 

Technical investors are often short term investors. 

Focused Investors marry the two concepts and use them in conjunction.