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

Assets with high and stable cash flows should be worth more than assets with low and volatile cash flows. You should pay more for a property that has long-term renters paying a high rent than for a more speculative property with not only lower rental income, but more variable vacancy rates from period to period.

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

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

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

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

The key lesson from this distribution should be that using the average as a comparison measure can be dangerous with any multiple. It makes far more sense to focus on the median.

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.