Average Reviews:
(More customer reviews)For investors subscribed to discounted cash flows valuation (DCF), there is no other books that offer the kind of in-depth anlaysis (both in step-by-step description and available scenarios using real companies) like this book does. Plus, Professor Damodaran maintains a free website where Excel-based valuation models and industry data are periodically updated. These features make the book invaluable. In short, if I am allowed to buy only one investment book, this is the one.
But since I can buy as many books as I want, it would be more important to tell what this book does not do. First, it's always important to get a second opinion. In this case, it would be something other than DCF. Currently, DCF and relative valuation (such as PE and PV) are the dominent valuation methods used in the U.S. And yes, they are both covered in-depth by this book, in addition to the Economic Value Addded method which is gaining momentum in recent years. But this book essentially dismisses the income statements in favor of cash flows statements for valuing securities, preferring DCF to relative valuation. This is certainly understandable in lights of recent manipulation of GAAP income by offenders like Enron, WorldCom and Tyco. But I believe it's important for investors to hear the voice for income statements valuation method. For that investors should get James English's Applied Equity Analysis - another must-have - as a second valuation reference book. Secondly, this book uses CAPM model for finding the discount rate. Again, it is true that CAPM is the most widely used model in the U.S., but I came to a conclusion, after reading close to a hundred critically acclaimed articles published in the last fifty years as part of my MBA requirements, that factor models provide better tracking of stock prices than CAPM does. Unfortunately, there is no good book available. For institutional investors, they can have models from BARRA and Wilshire, etc, but individual investors would have to construct their own, probably (like me) using the Fama-French three-factor model. Description of their model is available mostly from theirs and other published papers. Data are available from Kenneth French's own website at Dartmouth. Now since you read all the way through my review, here is your reward: go to Damodaran's website and download the manuscript of this book for free if you are really frugal.
Click Here to see more reviews about: Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Second Edition
Investment ValuationTools and Techniques for Determining the Value of Any AssetValuation is at the heart of every investment decision, whether that decision is to buy, sell, or hold. But the pricing of any financial asset has become a more complex task in modern financial markets. Now completely revised and fully updated to reflect changing market conditions, Investment Valuation, Second Edition, provides expert instruction on how to value virtually any type of asset-stocks, bonds, options, futures, real assets, and much more.Noted valuation authority and acclaimed NYU finance professor Aswath Damodaran uses real-world examples and the most current valuation tools, as he guides you through the theory and application of valuation models and highlights their strengths and weaknesses.Expanded coverage addresses:* Valuation of unconventional assets, financial service firms, start-ups, private companies, dot-coms, and many other traditionally valued assets* Risk in foreign countries and how best to deal with it* Using real option theory and option pricing models in valuing business and equity* The models used to value different types of assets and the elements of these models* How to choose the right model for any given asset valuation scenario* Online real-time valuations that are continually updated at www.damodaran.comA perfect guide for those who need to know more about the tricky business of valuation, Investment Valuation, Second Edition, will be a valuable asset for anyone learning about this critical part of the investment process.
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