zayneng

You can do weighted % on different model. It depends on the industry of the coy you analyzing. Must understand the industry before going into the companies financial. Using formula is easy, understanding where the companies stand in the industry is hard..once forecast wrong, whatever good formula you have will be useless.

marginofsafety

Like many of the posters in here, I'm not a huge believer in CAPM either cos IIRC the formula assumes the market to be fully(?) efficient and obviously I don't think it's true.

My take on the hurdle rate is that it should at least be set at your targeted returns. Say you're aiming for 15% CAGR over the long term, why would you use a discount rate of 10%?

As for dividend model vs FCF, I prefer using FCF cos IMO the value of a company is determined by how much cash it generates over the long run, not by how much dividend it pays out. And using FCF paints a more accurate picture of that.

weishengchua

Reply to @marginofsafety : hahaha yes, i think the view by almost all of the fund managers is that the efficient market hypothesis is solely for academics use and are not relevant when investing as well. https://www.youtube.com/watch?v=F0e87R90rcM

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mj0101

CAPM is kind of flawed but still useful, and I use market cap rates more now. Gordon's divi growth vs FCF depends on the company you are analysing. In the world world economy, new tech needs more a FCF approach

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