Part 12/13:
Valuation is about predicting future cash flows—not past earnings or ratios.
The core process involves three steps: Forecast the future, discount cash flows, compare with current price.
Stocks are undervalued when the modeled intrinsic value exceeds the market price, providing profit opportunities.
Focus on macro trends, technological progress, and first principles reasoning.
Wall Street's current deficiencies in valuation provide opportunities for disciplined investors.
The ultimate goal: become a "reality engineer," creating models that accurately reflect the future and generate consistent alpha.