Episode 118: How We Value a Business
No interview this week, so we decided to go through the personal strategies we use when trying to “value” a business. It is a complicated task, and one that is unique to every stock you look at, but here are the five questions I ask:
What is the free cash flow yield?
What can FCF/share grow at over the next 3 – 5 years?
How likely is it that my prediction of FCF/share growth is correct?
What potential downside is there at this price?
What FCF yield does this business deserve to trade at?
2. In the second half of the show, we covered some other fun and interesting topics including the AMC meme stock run, Pershing Square Tontine Holdings acquiring UMG, Bezos heading into space, the book Cable Cowboy, the new Alzheimer’s drug, and the Bitcoin conference (which was hilarious). Enjoy!
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Disclosure: The author and podcast guests are not your financial advisors. Ryan Henderson and Brett Schafer are general partners and portfolio managers at Arch Capital. Clients of Arch Capital may hold securities discussed on this show.