I am very, very old fashioned in my ‘valuation’ techniques. If you search through my blog you will see a lot of posts criticising the new gen valuation techniques.

I used to like the PDR – price to DIVIDEND ratio. Then my valuation friends changed it to PER (price earning ratio). Of course then there were many concepts..this post is not for that.

I taught in a couple of business schools before I gave up teaching (!). I told both the schools that the MBA kids need to learn business valuation. I always felt that many good Indian fund managers are very good as business analysts – they can pick value. At least one of the big 4 fund managers has got his timing wrong on 2-3 occasions, BUT NEVER ever got his business valuation wrong.

However colleges love to teach ‘sexy’ topics like charts, trends, RSI, ….but almost NOTHING on fundamental analysis (business valuation). I used to feel saddened when the colleges (and therefore the students) did not feel valuation is important.

Even to make simple common sense sink into people it is nice to quote authority. Now Warren Buffet (and I was getting disillusioned with him over the past 4 years)…said this in the shareholders meeting:

If business schools could offer just one course, it would not be on stock trading, the efficient market hypothesis or modern portfolio theory. Rather, B-schools should be encouraging students to learn the boring, but critically important, discipline of business valuation.”

Thank you Mr. Buffet…I stand vindicated. Hopefully the kids who read this blog will now think I am just saying what you thought (or continue to think!).

Will this statement of WB change things in US? Not sure.

Will it change things in India? Again not sure. However there are 2 colleges which will tell me ‘why do you not do a 15 hour course on valuation?’…hey no I am not interested, this is a suggestion for you to implement, not for me to implement 🙂 I refuse to give up my teaching sanyas.

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  1. Hi Subra,
    I am a so called ‘Kid’ reading this :).I am trying to find good books on valuation techniques but not able to find many.Could you suggest some books on how to do valuation and determine stock price?[I have gone through your books list but don’t really know which one is for valuation]

  2. Sirji, What are your thoughts on investing overseas. At present, couple of mutual fund (Motilal OSwal and ICICI Prudential) allow to invest in funds that invest NASDAQ/DJ stocks. Care to share your views?

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