#10 – Charles Sunnucks – The Company Valuation Playbook – How do you value a company and its shares?
Charles Sunnucks is a professional investor. A former fund manager at Jupiter Asset Management, he has lectured at The University of Cambridge, made multiple TV appearances commenting on markets, and actively co-managed a London stock exchange-listed investment trust. University educated in China, he speaks fluent Chinese and is both a Chartered Financial Analyst and a Chartered Alternative Investment Analyst.
Apple, Amazon, Tesla, Microsoft – great companies perhaps, but are they great investments? While there are various investment styles an investor might apply, investing over any reasonable period ultimately boils down to a simple reality. If you overpay for a stock, you are likely to get stung. If you underpay, then odds are you will profit. Therefore, to stack the deck in your favor when investing, the ability to value a company is vital.
The Company Valuation Playbook introduces you to the industry-standard tools used by professionals globally to value companies and their shares. Anyone, no matter their experience, can apply these valuation tools. All you need is a computer, the internet, and a bit of common sense.
Show Notes and Highlights from the Episode are below.
Charles and how he started at 0:00
Long term equity Investing and alternative investments including options, derivatives, and fixed income 2:11
How Charles decided to invest the way he does and how his book can help investors 6:32
when it comes to investing, how can you trust the Chinese if you can’t trust what they say 8:57
What is behavioral bias and how can we avoid it 10:23
Valuation tips and tools in the book that may help us as investors 12:12
Good investing books – we do a review of some 17:00
Having a fundamental approach helps, especially during a black swan event or downturn in the markets 20:11
THE BOOK IS A GREAT TOOL TO HELP PEOPLE MAKE INFORMED DECISIONS
“I found it very frustrating trying to find some material, how to learn, how to invest in the company very much adequately. You’ve got a range. You got a lot of content, which is too simple, perhaps that you can pick up of a website, how to do simple multiples and quite often a little bit of information is more dangerous than none at all. You suddenly feel perhaps overly confident without mastering really the forces that affect the company’s long-term value.
And then, at the other end, you got a whole host of very academic, very complex, not particularly accessible work. So this book, I hope, is really just a mid-road in, in that sense, for somebody who wants to make informed investment choices and be able to look beyond just the headline multiples or the headline kind of valuation techniques which individuals often use.”
BEHAVIORAL BIAS - WHAT IS IT?
“Yeah, so the behavioral bias section of the book, I think, is certainly one of the more interesting chapters. It’s something that kind of, we very much all fall short of fundamental impact. Obviously, technical investors don’t quite have this problem often.
There’s a great quote from Warren Buffett. He said investing success doesn’t correlate with IQ after you have above a score of 25. Once you have ordinary intelligence, you need the temperament to control urges that get others in trouble. And there’s a whole host of these behavioral biases.
It’s a bit of investing field, and it’s the key breakdown, which people normally do cognitive biases. Emergent and emotional biases say cognitive biases, such as anchoring, where psychologists have found that people tend to rely too heavily on the very first piece of information that they learn.
Even if that piece of information isn’t particularly relevant, say for it for investors, for example, there are various ways that anchoring can commonly manage historical values such as acquisition price or high watermarks. Although these numbers may be totally irrelevant to a company’s value quite frequently, as an investor, you will think you’re, you’ll think of a company’s value in terms of where you had purchased it rather than what is calculated, the fundamental value should be”
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LINKS FROM THE EPISODE
- Connect with Charles Sunnucks
Recommended Books
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