Part 3/13:
In response, the speaker expresses frustration, clarifying that Gary’s view oversimplifies the process. He explains that he regularly discusses valuation models with Herbert, implying that their approach is disciplined and model-driven. The speaker stresses that valuation is not just about looking at past earnings or ratios like P/E, but about understanding and modeling the future cash flows of a company.
The Core of Successful Investing: Predicting the Future
At the heart of the speaker’s message is a straightforward yet profound truth: the only way to truly value a stock is to project its future cash flows and then discount them to today’s value. Everything else—such as past earnings or ratios—is secondary or even misleading.