Low Risk, High Uncertainty: From Richard Branson To Mohnish Pabrai

There are many famed drop outs: Steve Jobs, Bill Gates, Mark Zuckerberg and Michael Dell. Surely one of the most famed serial entrepreneur and drop out is Richard Branson. At 16, Branson gave up studies to start his own magazine business. The magazine was called ‘Student’. It was a mail order business, which created a revenue from advertising. With a steady readership, Branson thought he could also sell other product […]

All Earnings Aren’t Created Equal: Judging Earnings Quality

Garbage in, garbage out. It’s a phrase typically used when talking about forecasting. Because it’s such a subjective art, your forecasts are highly dependent upon the assumptions you make. Lowering or increasing growth assumptions, discount rates and margins can drastically change what a financial model spits out. Hence, if your assumptions are garbage you’ll get a garbage valuation. Like I’ve mentioned before, there’s nothing wrong with creating financial models and […]

Financial Modelling: Assumptions Built on Assumptions

Wouldn’t it be great to know the future? Sure it might take the spontaneity out of life. But you could become the best investor ever. There is no such thing as a perfect investment record. Everyone picks up some losers along the way. But if you had an idea of what might happen, you could avoid the ‘bad eggs’ as they say. This is what financial models try to do. […]