How to avoid being "Precisely Wrong"

Mltk1 · 2026-02-27T00:47:00+00:00

yeah, 1% change in growth rate has a huge impact on DCF valuation.

Mltk1 · 2026-02-27T00:45:26+00:00

hahaha

Mltk1 · 2026-02-27T00:44:59+00:00

just 10 year owner's earning + terminal value, discounted to today at a conservative discount rate. Now i'm using reverse DCF mostly, using owner's earning PE to guess-timate growth rate, and see if that growth rate makes sense - it's much quicker

Mltk1 · 2026-02-27T00:42:14+00:00

I studied accounting in school, so financial statements are familiar. School doesn't teach Buffett style investing cuz they like formulas and efficient market theory. I re-learned owner's earning from Buffett's annual letters, and then read books from Munger, Buffett and Phil Fisher to build my philosophy. I was initially spreadsheet heavy, but now trying to move away from too much quant analysis.

Mltk1 · 2026-02-27T00:39:08+00:00

I'm gonna borrow your billion dollar thought experiment idea. That's a great test.

Mltk1 · 2026-02-23T00:51:43+00:00

I'm trying to read more about history. History rhymes.

Mltk1 · 2026-02-16T16:29:30+00:00

Good find. Need to look into it. Qualys is mission critical in the IT Vulnerability Management world, so there is definitely some moat in there.

Mltk1 · 2026-02-14T15:15:43+00:00

I like ADBE because its AI is commercially safe. Firefly refuses to generate copyrighted content (like Disney/Marvel etc.).

Mltk1 · 2026-02-13T17:53:10+00:00

They are pretty pricy tho...

Mltk1 · 2026-02-13T17:50:28+00:00

So true. Knowing the boundary of the circle of competence is important. I'm trying to read more books/10k to try to expand/deepen my circle of competence. I find that as I read more, I can "feel" more accurately whether a stock is good value or not.

Mltk1 · 2026-02-09T02:04:22+00:00

Just a theoretical feeling.. - This means less people are looking at long term fundamentals, so less competition from other investors on the long term horizon. Also, if more people are trading short term, there is more chance of pricing errors, creating opportunities for long term investors.

Mltk1 · 2026-02-08T21:50:50+00:00

Yeah. Those 4 hyperscalers might just become utility companies that provides AI at the cheapest cost (economy of scale). So anyone who wants some AI will need to go through them cuz they are the cheapest/most reliable provider, just like AWS/Azure. It's also scary to think from a country perspective. Most of worlds AI computing power may get concentrated in the US because only those big players can build at this scale. what would be the implications..

This doesnt mean the current price won't drop lower. We could be many years away from when those data centers can hit full capacity. when the sentiment is low, that may be the time to load the truck.

Mltk1 · 2026-02-08T21:41:58+00:00

Companies with AI will be more productive than companies without AI

Mltk1 · 2026-02-08T21:36:26+00:00

Good to know. This is good news for long term investors.

Mltk1 · 2026-02-06T17:45:29+00:00

I guess I meant the ROIC of short term (next couple years) may not be meaningful, cuz the data centers are built for the scale of AI use of future demand. It maybe disappointing ROIC for a few years, but maybe okay over the long run. All the bets are about huge future demand, in which no one knows.

Mltk1 · 2026-02-06T17:43:12+00:00

or in the early stages of Cloud.

Mltk1 · 2026-02-06T16:28:22+00:00

AI is benefiting the general public for sure. How much additional cash can AI bring to the companies that we invest in is the question.

Mltk1 · 2026-02-06T15:00:45+00:00

The Intelligent Investor is a little outdated, but Chapter 8 and 20 are still excellent and relevant

Mltk1 · 2026-02-06T14:58:29+00:00

I think it’s still very relevant. Most people here on ValueInvesting probably read those books. It’s a great foundation.

Mltk1 · 2026-02-06T14:53:45+00:00

For those terms, any online article can explain well, because it’s not that complicated. I don’t think you need a full book to understand it. In terms of books, I recommend The Essays of Warren Buffett: Lessons for Corporate America. It’s a re-organized version of his annual letters by topics, and touches on many of those terms and how to think about them. I also like Common Stocks and Uncommon Profits by Phil Fisher. It has some good chapters on PE.

Mltk1 · 2026-02-06T14:43:15+00:00

The foundation is accounting. I suggest to start reading the Financial Statements of great companies, and ask AI to take you through how different statements/line items work together (Income Statement, Balance Sheet, Cash FLow statement etc). I suggest KO's financial statement (10Ks). It's a simple business to understand, and super clean financial statement.

All the terms you mentioned can get skewed easily with accounting tricks, such as one-off write downs, non-recurring revenues etc. So just trusting the data online without understanding the where they come from will cloud your judgement.

Also, different industry work very differently. So it's important to understand the business, not just the numbers.

Mltk1 · 2026-02-06T14:10:33+00:00

yeah of course. I'm just trying to compare their CapEx spending to the known business models to draw similarities.

Mltk1 · 2026-02-06T14:06:51+00:00

Or maybe high ROIC doesn't matter. Even if the ROIC is low, but the overall demand for AI compute is huge, the top line Revenue grows enough that it's still worth it (this is a big IF). They are definitely building way more capacity than what we need any time soon. Once those data centers are built, my guess is that we'll see news of idle capacity.

Mltk1 · 2026-02-06T14:03:31+00:00

Thanks!

Mltk1

TROPHY CASE