Streetsmart Guide To Valuing a Stock (2nd Ed.) – Gary Gray

Course Overview
Streetsmart Guide to Valuing a Stock is a how-to book that provides you with the tools to make money in the stock market. The book’s focus is on stock valuation—an area of great interest to many investors, but understood by very few.
 
Course Outline
Preface xi
Acknowledgments xv
 
CHAPTER 1 INTRODUCTION AND OVERVIEW
Financial Flameout
Good Companies—Hot Stocks—Ridiculous Prices
The Investment Decision
The 10 Principles of Finance
Overview of the Book
 
CHAPTER 2 THE 10 PRINCIPLES OF FINANCE AND HOW TO USE THEM
Principle 1: Higher Returns Require Taking More Risk
Principle 2: Efficient Capital Markets Are Tough to Beat
Principle 3: Rational Investors Are Risk Averse
Principle 4: Supply and Demand Drive Stock Prices in the Short-run
Principle 5: When Analyzing Returns, Simple Averages Are Never Simple
Principle 6: Transaction Costs, Taxes, and Inflation Are Your Enemies
Principle 7: Time and the Value of Money Are Closely Related
Principle 8: Asset Allocation Is a Very Important Decision
Principle 9: Asset Diversification Will Reduce Risk
Principle 10: An Asset Pricing Model Should be Used to Value Investments
Summary
 
CHAPTER 3 STOCK VALUATION: SOME PRELIMINARIES
Introduction to Valuation
DCF Stock Valuation
We Caused the High-Tech Bubble
Return to Stockholders
Stock Price—Too High?—Too Low?—Just Right?
Stock Valuation—Art, Science, or Magic?
Stock Valuation Approaches: Fundamental, Technical, and MPT
Stock Value, Stock Price, and Emotions
Stock Value, Stock Price, and Analyst Recommendations
When to Buy, When to Sell: Our Recommendation
Where Do We Go Next?
 
CHAPTER 4 HOW TO VALUE A STOCK
Some Definitions Relating to Cash Flow
The Free Cash Flow to the Firm Approach
Why DCF and Not EPS?
The Discounted FCFF Valuation Approach
Microsoft—A Simple DCF Example
Valuation—Growth versus Value, Large Cap versus Small Cap
Valuation—The Next Step
 
CHAPTER 5 FORECASTING EXPECTED CASH FLOW
The Five Chinese Brothers
Growth Rates and the Excess Return Period
Net Operating Profit Margin and NOP
Income Tax Rate and Adjusted Taxes
Net Investment
Incremental Working Capital
Free Cash Flow to the Firm
Valuation Exercise: Estimating Free Cash Flow for Cisco
 
CHAPTER 6 ESTIMATING THE COST OF CAPITAL
Don’t Count Until You Discount
WACC and Market Capitalization
Estimating ConEd’s WACC
The Cost of Common Equity and Shares Outstanding
The After-Tax Cost of Debt and Debt Outstanding
The Cost of Preferred Stock and Amount Outstanding
WACC Calculation—ConEd
WACC Calculation—Cisco
Balance Sheet Items in the Valuation Process: Our Recommendation
Valuation Exercise: Cisco
After the Cost of Capital—The Next Step
 
CHAPTER 7 FINDING INFORMATION FOR VALUATIONS
Save a Tree—Use the Internet
The Internet and Investment Information
Cash Flow Valuation Inputs—Easy to Find
Cash Flow Valuation Inputs Requiring Estimation
Cost of Capital Valuation Inputs
Custom Valuations—The Next Step
Valuation Exercise: Cisco
 
CHAPTER 8 VALUING A STOCK—PUTTING IT ALL TOGETHER
Overview
Valuing Citigroup—December 17, 2002
Valuing Merrill Lynch—December 18, 2002
Valuing Berkshire Hathaway—December 18, 2002
Valuing Washington REIT—December 20, 2002
Summary
 
Glossary
Acronyms
Bibliography
Index
 
What Will You Learn?
When you’ve finished this hands-on, easy-to-use guide, you will have learned how to:
Value stocks of the general market and high-tech companies, such as Microsoft and Cisco Systems;
Value stocks of financial companies and real estates investment trusts, such as Citigroup, Merrill Lynch, Berkshire Hathaway, and Washington REIT;
Spot undervalued or overvalued stocks for buying and selling opportunities;
Estimate important valuation inputs such as growth, operating margin, and cost of capital;
Find valuation inputs on free Internet Web sites;
Develop a spreadsheet to value a stock;
Combine stocks in an efficiently structured investment portfolio;
Manage your risk;
Use the 10 principles of finance to your advantage.
 
Who Is This Course For?
Streetsmart Guide To Valuing a Stock (2nd Ed.) by Gary Gray is for all of you who mistakenly think you have to be a stock market guru to value stocks like a pro.