Success in investing comes not from being right but from being wrong less often than everyone else.

Intrinsic valuation provides a fuller picture of what drives the value of a business or stock, but there are times when relative valuation will yield a more realistic estimate of value.

In relative valuation, assets are valued by looking at how the market prices similar assets.

The intrinsic value of an asset is determined by the cash flows you expect that asset to generate over its life and how uncertain you feel about these cash flows.

Ultimately, there are dozens of valuation models but only two valuation approaches: intrinsic and relative.

Oscar Wilde Defined a Cynic as One Who “knows the price of everything and the value of nothing.”

If you accept the Markowitz proposition that the only risk you care about is the risk that you cannot diversify away, how do you measure the exposure of a company to this market-wide risk?

The macroeconomic risk that affects many or most firms cannot be diversified away. In the Markowitz world, this market risk is the only risk that you should consider, as an investor in a publicly traded company.

The discount rate can be viewed as a composite of the expected real return (reflecting consumption preferences), expected inflation (to capture the purchasing power of the cash flow), and a premium for uncertainty associated with the cash flow.