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The Breakdown
  • Nick Correa and Jack Farley break down an RV video from this week
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Breaking Down Aswath Damodaran's Thoughts on Valuation and The Equity Risk Premium ("It's the DCF, Stupid...")

Today @Nick Correa and I decided to explore the most important question of all in finance: how does one value a security? Sure, we all know what the price is (just look it up...) but what is the true value of something?

To answer this question, we take a look at a few clips from my recent interview with Professor Aswath Damodaran, who is the world's leading authority on the subject. Charts below. We hope you enjoy!

Charts:

Formula for a Discounted Cash Flow (DCF) Model (It's the DCF, stupid...)

Equity Risk Premium over time:

Equity risk premium (red bar) PLUS the risk free rate (blue bar) = the discount rate. This is the rate at which future cash flows are discounted to the present.


Thanks so much @Farrell Murphy and @Weston Nakamura - and, of course, the one and only @Nick Correa !
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@Jeremiah S @John Ahearn @Jaymes Rosenthal @Moritz Heiden @Matt Daniell @Craig P @Bradley Snyder @Sam Colt @Theodore Boydston @thomas cullis @Aneil Pokharel @Dennis Jarvis @Konrad Zawadzki @Joseph J @James J P Mulholland @Xavier Mejido @Master Of Money @Tom Catternan @Kewal Mistry @Jehan Hiramanek @Sean Morgan @Sam Mitchell @John Ahearn @Dan Little @Matthew Lansing @Matthew Lansing @Adam Toth-Fejel @Theodore Freysen @Seahyung Park @Sean Morgan @Bryce G @Dean W @ALLEN AZAR @Oliver Anderson @Andreas Niederberger @Cristofer Atiencia @Lemony Snicket @Brian Caputo @Brian Lee @brian barry @bill foord @Georgii Verbitskii @Max Wiethe @Stefan Clulow @John Fadool @Collin Velarde @James Clark @Daniel Olarte @Paul LaRue @Chris Clark @Roo Larson... (More)

The Equity "It Factor" (Breaking down Sam Burns' Risk Models on Volatility, Credit Spreads, Momentum, and Risk Appetite)

Hey all, @Nick Correa are back at it again, this time breaking down how Sam Burns uses his equity risk model to determine an ideal stock/bond allocation (the riskier the market is, the more bonds and fewer stocks you would want to own).

We get into key topics such as volatility and momentum, and we also take a look at Burns' own model, the Monitor of Analysts' Earnings Revisions (MAER), and what it indicates about which sectors (financials, energy, industrials, etc.) are the most attractive at this time.

Please enjoy! And comment if you have any questions or want clarification about Sam's process. Charts below

Link to the original interview:

https://www.realvision.com/shows/the-expert-view/videos/asset-allocation-in-a-risk-on-environment-bank-and-industrial-stocks

Global Equity Risk Model:

Components of the equity risk model:

Dividing the MSCI "All Country World Index" (stocks) by 10 year Treasury index (bonds) can indicate investors' appetite for risk (https://www.msci.com/acwi):

When high volatility stocks are doing well, that too is a sign that investors are putting their foot on the gas pedal:

Same when high beta stocks are outperforming the low volatility equities:

Interestingly, financials and energy now comprise a large part of the high beta index:

Here is Sam Burns' MAER rankings about which sectors have the best analyst earnings revisions (top to bottom):

Analyst are tripping over each other to update their earnings estimates for financials:

Thanks so much @Farrell Murphy and @Weston Nakamura - and, of course, the one and only @Nick Correa !
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@Jeremiah S @John Ahearn @Jaymes Rosenthal @Moritz Heiden @Matt Daniell... (More)

Weston NakamuraVisionary
Real Vision Exchange Manager, Programming and Community Engagement

Being productive on Memorial Day - learn blockchain

https://vimeo.com/557232337

This is for everyone. Non crypto folks to blockchainbusters and everyone in between. Don't let a D student surpass you! 

watch → HOW BLOCKCHAINS WORK: A VISUAL WALKTHROUGH  Anders Brownworth w/ @Ash Bennington 

Ignore ESG at your own peril?? (Breaking down Marin Katusa's views on ESG ratings, carbon credits, and cost of capital 🛢️🌲🌊📈📉)

Hello friends of the Real Vision Exchange!

In our most ambitious breakdown yet, Nick "Man Of All Seasons" Correa and I venture deep into the heart of ESG investing (Environmental, social and corporate governance).

We explore the thinking of natural resource investor Marin Katusa, who argues that ESG will lower the cost of capital for firms that comply with environmental standards - and raise them for firms that dare to defy this inexorable trend.

Please enjoy and see charts below.

NextEra Energy (green line) able to secure cheaper financing (e.g. "lower cost of capital") than Marathon Oil Corp (blue line).

Performance of oil ETFs $XLE and $IXC over the past decade. Yuck

Outfperformance of Tesla and green utility stocks:

Implosion of some of the green SPACs ($NKLA and $XL)

Carson Block and @Max Wiethe taking XL Fleet to task on Zer0esTV's: "The Chopping Block":

https://www.zer0es.tv/big-announcements/carson-blocks-new-short-xl-fleet/

@Jeremiah S @John Ahearn @Jaymes Rosenthal @Moritz Heiden @Matt Daniell @Craig P @Bradley Snyder @Sam Colt @Theodore Boydston @thomas cullis @Aneil Pokharel @Dennis Jarvis @Konrad Zawadzki @Joseph J @James J P Mulholland @Xavier Mejido @Master Of Money @Tom Catternan @Kewal Mistry @Jehan Hiramanek @Sean Morgan @Sam Mitchell @John Ahearn @Dan Little @Matthew Lansing @Matthew Lansing @Adam Toth-Fejel @Theodore Freysen @Seahyung Park @Sean Morgan @Bryce G @Dean W @ALLEN AZAR @Oliver Anderson @Andreas Niederberger @Cristofer Atiencia @Lemony Snicket @Brian Caputo @Brian Lee @brian barry @bill foord @Georgii Verbitskii @Max Wiethe @Stefan Clulow @John Fadool @Collin Velarde @James Clark @Daniel Olarte @Paul LaRue @Chris Clark @Roo Larson... (More)