A stock may look cheap relative to comparable companies today, but that assessment can shift dramatically over the next few months.

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.

Ultimately, for a firm to grow, it has to either manage its existing investments better (efficiency growth) or make new investments (new investment growth). To capture efficiency growth, you want to measure the potential for cost cutting and improved profitability. It can generate substantial growth in the near term, especially for poorly run

In conventional discounted cash flow valuation models, we use higher discount rates on riskier cash flows and lower discount rates on safer cash flows.

The risk of any asset then becomes the risk added to this “market portfolio,” which is measured with a beta. The beta is a relative risk measure and it is standardized around one; a stock with a beta above one is more exposed to market risk than the average stock, and a stock with a beta below one is less exposed. The expected return on the

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.

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

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.

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