Wednesday, April 13, 2005

My First Book Review

The market ended on a nice upswing as minutes from the March Fed meetings came out and it looks like they will continue with measured hikes instead of accelerating interest rate hikes.
This news (and trading) lifted the indices and most stocks.

The first book I wanted to talk about is somewhat technical, but I think it's one of the best books out there on valuation (and if you know a better one, please let me know).
The book is called Investment Valuation (2nd edition) by Aswath Damodaran. The book is about valuation of any asset, so it does cover a variety of subjects. The book goes into incredible detail and also uses real companies to show how to calculate certain things (like valuation based on a country premium approach). The book covers financial companies, private firms, distressed firms, new firms, stocks, options, and projects. He also breaks down the valuation of common stock and earnings multiples, book value, growth, cost of capital, and financial ratios (ROE, ROA, etc).
This book is for readers who want to learn more details about valuing any asset. He goes through all the major techniques (cash flow valuation, dividend model, gordon growth model, 2 stage dividend model, 3 stage dividend model).
Basically if I can only keep one of the books I have, this would be the one.

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