The availability bias is one of the most frequently overlooked and misunderstood cognitive biases that plagues investors. When investors fall prone to the availability bias, they overweight the most easily accessed and digested information. For example, a few months ago my uncle messaged me about a stock idea after reading a financial periodical. His […]Read More Availability Bias
A value trap investment is a bit of a tricky subject. At first glance, a company looks cheap. At second glance, it looks too good to be true. You think to yourself, “why am I able to buy conglomerate X below book value? Why can I buy X at a single digit price to earnings […]Read More Comcast (CMCSA) – A Value Trap
Name a rich investor. Chances are the first person that popped into your mind was Warren Buffett. As of today, Buffett’s Berkshire Hathaway fetches over $292,000 per share and its total market capitalization is just shy of $500 billion. Buffett has widely praised his former teacher and mentor, Benjamin Graham for helping him become a […]Read More Is Value Investing Still Relevant Today?
Oftentimes the terms revenue, gross income, and net income are incorrectly used as synonyms. While all three are related, they are different in what they mean and their function for an investor to make informed decisions. Imagine a T-shirt screen printing company, Bob’s T-shirts. The business purchases shirts in bulk and can screen print shirts […]Read More Revenue, Gross Income, and Net Income
Sum-of-the-parts-analysis: a method of investing where each individual part/company/division inside a larger company is valued individually. Let’s take real life example of analyzing a sum-of-the-parts analaysis in stock investing. Madison Square Garden (MSG) is one of the most famous venues in the world. It is listed on the NYSE (as of 4/15/18) at $241.48 […]Read More Sum-of-the-parts analysis; Madison Square Garden (MSG)
Imagine I asked you to give me a range of values for which you are 80% confident you are right. For example, give me a range for your weight in which you are 80% confident. This one is easy. All you do is remember the last time you weighed yourself and maybe add or subtract […]Read More Understanding the Anchoring Bias
Have you ever been at a social gathering with someone who studied finance in college? You know, the unbearable kind of person who is all too eager to point out how you are always “not leveraging your time effectively,” or better, uses student loans to finance vacations. Chances are, this same person excitedly tells […]Read More Price vs. Market Cap vs. Enterprise Value