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The resulting debate among accountants about how to bring intangibles on to the books has spilled over into valuation practice, and many appraisers and analysts are wrongly, in my view, letting the accounting debate affect how they value companies.
Barry Ritholtz: The old, the old joke, half of our advertising dollars are wasted. I think actually if you go public, there tends to be a more of a concentration in owners holding founder 00:17:41 [Speaker Changed] Stock. But there’s always gotta be some element of the valuation really being compelling.
Setting the Table As with any valuation, the first step in valuing Airbnb is trying to understand its history and its business model, including how it has navigated the economic consequences of the COVID. Second, they also derive revenues from online advertising by hotels and travel providers.
He has a very interesting approach to thinking about market valuations and strategies and when to deploy capital, when to go with the crowd, when to lean against the crowd, and has amassed and excellent track record. Second part of our framework is valuation fundamental work. Well, that means valuations are probably too high.
What’s the valuation? So that comes out in position sizing and conviction and just making sure that you’re thinking about all the things that could go wrong if you’re taking a more concentrated position in something. I’m sorry, I’ve never advertised for the podcast other than a couple little experiments.
But in the New York Times, there was an advertisement that the value line investment survey needed analysts. Low price stock has historically had some very large concentrated positions. We thought it was free advertising for their index, but I guess guess they thought that their index was pre advertising for our fund or something.
During Facebook’s Q2 quarterly results last month, Facebook COO Sheryl Sandburg said monetization beyond advertising across all of the platforms that Facebook operates, including Messenger, was still “early days.”. And these young businesses — young as in less than a year old — have now raised capital based on multibillion-dollar valuations.
That "small cap premium" has found its way into valuation practitioners playbooks, manifesting as an augmentation (of between 3-5%) on the cost of equity of small companies. Thus, Meta and Alphabet now have dominant market shares of the advertising business, just as Uber, Lyft and Grab have consolidated the car service business.
The transcript from this week’s, MiB: Aswath Damodaran: Valuations, Narratives & Academia , is below. You’re known as the dean of valuation. He said, oh, dean of valuation, it’s easier to say. So let’s start with the question, what led you to focus on valuation? RITHOLTZ: Right. And I said, why?
Doesn’t it deserve a, a richer valuation? And it doesn’t matter if you’re selling frozen pizza to search advertising, okay? One is just generally on the valuation question with technology and similarly, the market concentration of the magnificent seven. I’m shocked it’s only 29%.
In the last three decades, we have seen this process play out in industry after industry, from the retail business (with Amazon), the music business (with Apple iTunes first and Spotify later), the automobile business (with Tesla) and advertising (with Google and Facebook), to name just a few.
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