CFA Institute Live Webinars Presentation Recorded 12 Apr 2018
The Discounted Cash Flow Method and the Hubble Telescope
The Discounted Cash Flow (DCF) method of valuing financial assets is intuitive, relatively simple, and precise, and works well for assets with predictable cash flows, including bonds, real estate investments, and asset leasing. However, when it comes to equity investing, there exists the “Hubble Telescope problem.” Curtis Jensen, the former Chief Investment Officer of Third Avenue Management, reportedly said, "DCF to us is sort of like the Hubble Telescope—you turn it a fraction of an inch and you're in different galaxy." Any small changes in growth estimates, cost of capital, and terminal growth rates in a DCF calculation can result in wildly different outcomes.
In this webinar, Rajeev Thakkar, CFA, will discuss whether it’s better to stick to the practical DCF method in valuing equity shares, or whether there is some benefit to using heuristics and other alternative valuation techniques.
This is an archived version of a live webinar that took place on 12 April 2018.
About the Speaker(s)
Rajeev Thakkar, CFA is the chief investment officer and director of PPFAS Mutual Fund. He has possessed over two decades of experience in various segments of the Capital Markets such as investment banking, corporate finance, securities broking and fund management.
His association with PPFAS Private Limited (The Sponsor of PPFAS Asset Management Company Private Ltd.) began in 2001. He was appointed the Fund Manager for the erstwhile flagship scheme of the Portfolio Management Service, titled "Cognito" in 2003. He is a strong believer in the school of "value-investing" and is heavily influenced by Warren Buffett and Charlie Munger's approach. Apart from his technical ability, what distinguishes him from many others is his ability to stand his ground and remain unflappable during difficult times.
Rajeev is a regular contributor to Mint newspaper and has also appeared on business channels such as Bloomberg India TV and ET Now. He is a qualified Chartered Accountant, Cost Accountant and CFA Charterholder.
Shreenivas Kunte, CFA, CIPM, is a director of continuing education and advocacy at CFA Institute. In this role, Mr. Kunte contributes to thought leadership in the investment profession. He writes on investing topics in leading publications and represents CFA Institute at conferences and forums. Mr. Kunte serves as an external research scholar at the Indian Institute of Technology Bombay. Previously, he worked as the country trading strategist for Citi in Tokyo, Japan. He holds a degree in computer engineering from the University of Mumbai.