What is the best way to learn valuation?
Hi guys, i'm preparing myself for the upcoming interviews (ibd) and my major is engineering, so i'll have to learn by myself valuation and accounting mostly, what do you guys recommend me to do? damodaran? biws? Wallstreet prep? have also heard of investment banking from joshua and joshua. Also, if you know ib interviews more than i do and feel like there is another subject i have to learn to ace the interview, please tell me. Thank you all!
Wall Street Prep is pretty good. You can get a 15 percent discount too.
I used 'Breaking into wallstreet' They have loads of free content on DCF, Merger models , LBOs. This should be enough to get you through the interviews. Also, it would help if you could relate some of the models to actual deals that took place.
Trouble With Learning Valuation (Originally Posted: 10/11/2014)
Hello everyone,
I am a new member of this community. I am having trouble really learning the basics and getting my feet in the water. I have purchased the Breaking Into Wall Street Financial Modeling course but can't seem to understand anything related to valuation. I have tried to read the Vault guide and also the book by Pearl and Rosenbaum but still no luck. I have taken two accounting courses so far and did very well in them and am currently in a corporate finance course. I have no issues constructing and analyzing financial statements, but when it comes to valuation (DCF, Comps, etc) I can't seem to get it.
Does anybody have any suggestions or advice? I'm at a non-target school and so this probably explains my incompetence. Is there any resource that teaches all this shit in an easy to understand manner? Appreciate anything you guys have for me.
There is a great investment banking textbook by Rosenbaum that's helpful; we use it for my undergraduate IB class.
Yeah I actually read the portion of Rosenbaum's book on Multiples and Comps, but when I started the section on Precedent Transaction Analysis I got really lost. Anything else you been reading or come across that puts this shit in layman's terms? Thanks dude.
read, read, read. sign up for a modeling class.
Did sign up for the modeling course but am still struggling. Any other advice? Thanks.
Hey pal, thanks for the detailed reply. Actually, everything you wrote up there makes sense and it is rather simple to comprehend, but I still feel like I could not lay out everything for an interviewer. How in depth are the interviews for an internship? Will they actually have me build the model from scratch or do I just need to be able to talk about the concepts? Do they actually teach you anything when you get a job or do you hit the ground running? Thanks for your help chief.
Thanks a lot, this is really helpful
This was wonderful! This is how students should be introduced to Valuation concepts- so much easier!
In most interviews you will have to walk through a DCF and explain the differences between the other two main methods of valuation (precedent transactions, and company comparables)
Regarding on the job learning... I can only tell you what I have been told by friends in the industry. You will learn everything you need to know on the job. The amount of responsibility required can depend on how lean your deal team is, or the amount of deal flow...so that can increase the learning curve. But all of my friends have said their school work was only somewhat applicable.
To be honest, I don't think first year analyst do much valuation until at least a few months after starting. So, you will be able to handle it once you are required to do such work.
Preciate the reply boss. Hopefully I can get to a stage where I feel comfortable enough discussing the concepts, but I don't think I'll be able to do it in Excel if they ask me to. Have you ever heard of a hands on interview where they actually require you to build a model in front of the interviewer? And when you say walk through, how in depth do I have to go? Could you give me an example? All I can say for DCF so far is that it's about projecting FCF for a certain number of years and then using NPV to discount them back to today through the CAPM and WACC. Do they give you numbers and have you do it like that? Thanks again for all your help chief and I apologize for all these dumb questions and sounding like a dumbass.
I mean dude, this stuff takes time. Try and find a friend who you can bounce ideas off of. Read the posts on here. It will accumulate slowly.
Amen boss, no arguments here my man. Just been feeling shitty because I'm at a non-target school and it seems like I won't get to live the dream of becoming a banker. I met an alumni over the summer who works at an MM shop down here in the South who told me I absolutely need to know my shit before I can even consider applying to any positions. I know application deadlines are coming up real soon and I don't feel like I'm ready. I've been trying to go at it for about 2 months and haven't really made substantial progress. Also should mention that I'm a junior and the next summer will determine if I ever get to work in IB or not.
I have the same problem recently, and I think the main reason is that I don't have some fundamental knowledge about accounting
I've used Breaking Into Wall Street and I've had a tremendous success in learning from it. I didn't take any finance classes during undergrad and took only one accounting course. If you're ever stuck just email the guys at BIWS. They're always open to answering questions about the topics they teach about.
"Non-target school so this probably explains my incompetence" - Coming from another non-target who has made it in the industry.... literally go fuck yourself
Fuck this line of thinking. Do not ever succumb to this. Most Ivy League kids are clueless about Accounting and Finance before they start preparing for interviews. The whole target vs. nontarget thing is a filtering mechanism. You need to be realistic about the pace at what you'll learn something that you haven't used before in a practical setting. Give yourself some credit. You may be cut out for the job, you may not. But it has very little to do with the school you attended.
Go to damodarans site and print out his slides. Then take his corporate finance video class online. Then take the entire valuations class. Come back in 6 months - 1 year. You should be an expert. If not, then something is seriously wrong with you.
Quit with thinking you're somehow dumber than others because you are at a "non target". Can everyone stop the bullshit elitist crap already?-
In terms of non-target and modeling, I completely know where you're coming from. I just signed a FT IBD offer at a boutique (I personally didn't want to go bulge, but understand those who do) and I taught myself valuations and modeling. But nobody really teaches in depth modeling at undergraduate schools.
For me, I had constantly rereading articles, guides, practice models, etc. You won't understand at first. It is similar to learning a language and takes time and practice. See if you can get a DCF model that someone has built to practice. Rebuild it and trace their steps. This was how I learned modeling. Just immerse yourself in finance and read all you can. It will begin to make sense.
I also studied this stuff for interviews with a buddy. We would quiz each other on valuations and teach each other what we knew. His accounting skills were stronger than mine so he helped me there and I taught him basics behind DCF and LBO.
I had to build a DCF in an interview, but I am the only person I've heard of who has ever had to do this. I was given a 10-k and blank excel document, but I was evaluated based on my logic and how I progressed through the work. Not accuracy. Again, I have never heard of anyone else doing this.
At this interview, I was the only non-target, but I had better modeling skills than the target kids. To my knowledge, nobody really teaches modeling in undergrad. Nobody comes out of undergrad with the ability to build a full DCF, LBO, pitchbook, etc. This is learned from internships, self practice, and on the job. Just be able to understand the rationale behind each one.
You're a non-target. It is tough, but it can definitely be done. You just have to be willing to work harder and longer to get there than anyone else. The fact you're reaching out about learning valuations shows you're on the right path. Keep it up.
Read more and keep practicing "more you practice more you learn" it is the formula.
Damn, I didn't mean to offend any of the people on here at non-targets who made it to the big leagues. I realize I have self esteem issues and definitely need to work on that aspect of myself along with increasing technical knowledge. It's not like I'm the first one either from my school who had to endure this struggle. We've had several alumni break into IB, many with BB firms so I really don't have an excuse. Thanks to everyone for the advice and encouragement, y'all the real MVPs and we fuck with it in the South, you feel me?
In dire need of understanding valuation (Originally Posted: 09/14/2012)
The title is a bit dramatic but basically I have been learning about investing here and there since 4 months...
Before this time I had no idea about investing and I was one of those people who imagined making MM's on $1000 starting capital ... lol ..
Well since then I have obviously smartened up read a lot of books,programs etc mainly: Beating the Street Peter Lynch Letters to Berkshire Shareholders W. Buffet Boundless SEC filings 10-k 8-Q Some boring books on technical analysis Bloomberg,Capital IQ
On my list I currently have: Security Analysis, Ben Graham Intelligent Investor, ^
I am currently reading Security Analysis got up to page 70 but will probably read over, I feel as if the material just won't stick and I can help but feeling I should spend my time learning valuation better...
I have an account with OptionsHouse which is kind of shitty but the low rates are great....
I mainly am interested in options trading and well this week I have made quite a bit of money except most of it was on speculation from what I believe...
I thought apple would go up based on the new release and overall extended market happy euphoria in stocks going up and with QE3 and massive inflows
I bought 2 Apple Calls at $6.30 on Tuesday at Strike 660, when the stock was around 662 or something... Well I sold it of a little below today's top and made quite a bit of money
I am happy with these results obviously but will refrain from trading because I still have no 100% idea on what I am doing
I am not bragging since I know most of this was based on sheer speculation and the next time I'll probably get killed
I've rambled a lot so I'll get to my question:
What should I read and do to better understand Valuation and Catalysts in stocks?
personally, i suggest you take a step back and learn about how a company creates value. McKinsey's Valuation is a great starting point - a bit conceptual, but if you get that down you'll really understand not just how do you value something but what drives its value. it has a fundamental slant, but hey, so does ben graham.
cheers.
http://disgu.st/~jon/books/seth_klarman-margin_of_safety.pdf
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