Focus for WEEK 1 on the idea that the stock price is composed of two factors: Facts and Feelings.

Fundamentals and Valuations

The first week covers a lot of ground. Don’t try to just cram it all into your head at once. Take it one page and concept at a time. Don’t let the fewness of the pages fool you. The study material is dense. By design. I like it to be succinct and devoid of fluff and repetition.

• F times V

The facts are value drivers like sales, profits, assets, or people, number of clients and so on. Real world stuff that is worth something.

The feelings are the condensed sentiments of all investors, it’s their sum total of trust in the company’s ability to keep creating annual value.

If the fact is “the company made 100 in profits in 2023” and the feeling is “the company will keep making 100 in profit per year into eternity, and I’m happy with a 10% annual return on my investment”, then I’ll pay 1000 for the company”

Intuitive and robust

P=FxV is an intuitive and robust method of analysis, of taking things apart and studying the components, before building back up to an investment conclusion. 

There are many other approaches, such as DCF, return-based models, and price-based ones. P=FxV is the best one however, I think, because it captures the 2-sidedness of markets, that markets are both fundamental and sentimental. The two sides of the coin are forever joined, and we as investors have to take that into consideration.

Read Brief Summaries of The Other Weeks of The Investing Course:

• Week 2: Finding & Collecting Stocks
• Week 3: Business Analysis & Forecasting
• Week 4: Timing Your Investment
• Week 5: Portfolio Management
• Week 6: Case Studies