Author Topic: Valuation - McKinsey  (Read 17030 times)

Liberty

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Valuation - McKinsey
« on: July 13, 2015, 06:49:52 PM »
One of the best books I've read on valuation has a new edition coming out next month. This is the 6ht, the 5th that I've read had a red and white cover. Thought it'd interest some here:

http://www.mckinsey.com/client_service/corporate_finance/latest_thinking/valuation

http://www.amazon.com/Valuation-Measuring-Managing-Companies-Website/dp/111887370X/
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LR1400

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Re: Valuation - McKinsey
« Reply #1 on: July 14, 2015, 07:07:40 AM »
I learned a lot from the book and its counterpart, Value. However, it's not my favorite for corporate valuation. I found it needlessly complicated at times.

Security Analysis and Business Valuation on Wall Street is better for what most people on this site want.


Liberty

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Re: Valuation - McKinsey
« Reply #2 on: July 14, 2015, 07:52:09 AM »
I learned a lot from the book and its counterpart, Value. However, it's not my favorite for corporate valuation. I found it needlessly complicated at times.

Security Analysis and Business Valuation on Wall Street is better for what most people on this site want.

This one?

http://www.amazon.com/Security-Analysis-Business-Valuation-Companion/dp/0470277343/

What would you say makes it better? Thanks in advance.
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innerscorecard

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Re: Valuation - McKinsey
« Reply #3 on: July 14, 2015, 08:42:56 AM »
That's very exciting. My technical skills could always use improvement. I will get the new 6th edition.
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jawn619

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Re: Valuation - McKinsey
« Reply #4 on: July 14, 2015, 02:19:55 PM »
One of the best for sure

LR1400

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Re: Valuation - McKinsey
« Reply #5 on: July 14, 2015, 02:31:02 PM »
I learned a lot from the book and its counterpart, Value. However, it's not my favorite for corporate valuation. I found it needlessly complicated at times.

Security Analysis and Business Valuation on Wall Street is better for what most people on this site want.

This one?

http://www.amazon.com/Security-Analysis-Business-Valuation-Companion/dp/0470277343/

What would you say makes it better? Thanks in advance.

Yes. I think that book, the book Investment Banking by Rosembaum & Pearl and the Wall Street Prep materials are better. They are written by practitioners.

The book referenced above does a good job of giving an overview of valuing different industries as well. For example, they point out the difference in valuing a natural resource company, a finance company, etc. Hooke walks through examples and describes the thinking behind the valuations.

undervalued

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Re: Valuation - McKinsey
« Reply #6 on: July 14, 2015, 03:30:47 PM »
What do you guys think of Aswath Damodaran valuation books? This one is pretty concise and short http://www.amazon.com/Little-Book-Valuation-Company-Profit/dp/1118004779/ref=asap_bc?ie=UTF8.

Does McKinsey's book use examples straight from 10K without adjustments?

I've been reading Damodaran's book and still has trouble finding where he get the depreciation numbers from (in the Free cash flow to Equity section). Since I can't find it in 3M 2007 10K report, I am not sure whether that number is a typo or he did some other adjustments to get to that depreciation number.
« Last Edit: July 14, 2015, 03:45:15 PM by undervalued »
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LR1400

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Re: Valuation - McKinsey
« Reply #7 on: July 14, 2015, 03:57:41 PM »
What do you guys think of Aswath Damodaran valuation books? This one is pretty concise and short http://www.amazon.com/Little-Book-Valuation-Company-Profit/dp/1118004779/ref=asap_bc?ie=UTF8.

Does McKinsey's book use examples straight from 10K without adjustments?

I've been reading Damodaran's book and still has trouble finding where he get the depreciation numbers from (in the Free cash flow to Equity section). Since I can't find it in 3M 2007 10K report, I am not sure whether that number is a typo or he did some other adjustments to get to that depreciation number.

I prefer the books from practitioners myself. Green wald's book is good though.

I personally think the academics and those like them over complicate subjects. The Hooke book helped me a lot because it helped me understand how to value and look at various industries.

jawn619

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Re: Valuation - McKinsey
« Reply #8 on: July 14, 2015, 06:34:12 PM »
What do you guys think of Aswath Damodaran valuation books? This one is pretty concise and short http://www.amazon.com/Little-Book-Valuation-Company-Profit/dp/1118004779/ref=asap_bc?ie=UTF8.

Does McKinsey's book use examples straight from 10K without adjustments?

I've been reading Damodaran's book and still has trouble finding where he get the depreciation numbers from (in the Free cash flow to Equity section). Since I can't find it in 3M 2007 10K report, I am not sure whether that number is a typo or he did some other adjustments to get to that depreciation number.

yes the McKinsey book uses examples. Also, some of what they say is very clear. They care a lot about cash flows, and seeing increase in intrinsic value as the main driver of share price growth, and separating a business into operating and non operating assets/liabilities.

vinod1

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Re: Valuation - McKinsey
« Reply #9 on: July 14, 2015, 06:49:07 PM »
Most of my favorite books on valuation are mentioned above.

The books mentioned above cater to different sets of needs and provide different perspectives.

Damodaran's investment valuation is most comparable to McKinsey's book, in that they do a deep dive on the minutia of valuation. Except for the part about using beta to estimate required returns, it is useful to know almost all the other facets of valuation covered in these books. You might not actually make LIFO to FIFO adjustments or currency translation adjustments in real world valuation - it is one thing to know how these are impacting the financial statements and consciously ignore them for simplification and not knowing what is going on and if it is a positive or negative or if these effects cancel out over the long term. Even if you end up just using multiples, knowing the underlying assumptions behind them helps you to think more clearly. I found out I had been abusing the DCF method before I read Damodaran's book in depth - one of many many but this is most glaring.

I personally liked Damodaran's book much better than McKinsey. Perhaps because I started with Damodaran's book and breezed through McKinsey as they cover very very similar material with a slightly different terminology.

I also like Jeffrey Hooke's book and Greenwald a lot. They provide a completely different perpective, Hooke's a high level overview and how to value different types of businesses using industry specific methods. Greenwald comes about from a completely different angle based on moat vs. no moat and reinvestment opportunity.

I think reading Damodaran or McKinsey's book and both Hooke's and Greenwald provides a nearly comprehensive valuation toolkit for investors.

Vinod
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