A preface and introduction to pillars of valuation

What is the difference between speculation and investment and how is this manifest in the real world?

Dear Reader,

All investment analysis, at the fundamental level, boils down to one question: What is this asset worth?

There are all manner of nonsense investment theses I come across on a daily basis. Invariably they boil down to a hunch about price movements.

“The company is going to keep growing like crazy.”
“People are always going to want x, y or z.”
“The stock just has to bounce back.”
Or, my personal favorite: “The stock has been rocketing - it’s virtually guaranteed to continue. Free money!”

Statements like these suggest that the opportunity being discussed is a speculation rather than an investment. There is nothing inherently wrong or immoral about speculation. It can be enormously profitable if timed well. Although speculation and investment seem inherently similar, they are vastly different modus operandi. I will solidify the difference for you now and then, over the coming weeks, take you through the fundamental pillars of valuation.