Top Highlights

• Finally, successful stock-picking means having the courage to take a stance that’s different from the crowd. There will always be conflicting opinions about the merits of any company, and it’s often the companies with the most conflict surrounding them that make the best investments. Thus, as an investor, you have to be able to develop your own opi...
• 2. Believing that it’s different this time 3. Falling in love with products 4. Panicking when the market is down 5. Trying to time the market 6. Ignoring valuation 7. Relying on earnings for the whole story
• The value of a stock is equal to the present value of its future cash flows. No more and no less.
• Here’s what you need to know for practical purposes: As interest rates increase, so will discount rates. As a firm’s risk level increases, so will its discount rate.
• At Morningstar, we use 10.5 percent as the discount rate for an average company based on the factors in the preceding list, and we create a distribution of discount rates based on whether firms are riskier or less risky than the average. As of mid-2003, firms such as Johnson & Johnson, Colgate, and Wal-Mart fall at the bottom of the range, at aroun...