What is an Investment Worth?

On today’s show we are talking about investing fundamentals. What is an investment worth? If you watch the TV show Shark Tank you will see the contestant say that they are seeking $X in exchange for y% of the company. The sharks then do some quick math to determine the enterprise value and then compare the income as a percentage of the valuation. They are trying to get a sense of the current value of the company based on multiples of net income. That’s how companies should be valued.

We now have a stock market index that is dominated by five companies which are Nvidia, Microsoft, Apple, Meta and Amazon.

All of this is being driven by the anticipation of the impact that AI will have on the industry.

We need to ask ourselves questions as to whether what is happening in the stock market makes sense or not.

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