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ValuFocus Investing: A Cash-Loving Contrarian Way to Invest in Stocks by William F. Mahoney, Rawley Thomas

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Epilogue—Key Takeaways

As a K–6 special education teacher, my wife Kelly challenged me to succinctly summarize for you the five most important takeaways from ValuFocus Investing:

1. Simple to use, but not simplistic (like driving a car).
2. Conceptually sound.
3. Empirically validated.
4. Achieves lower risk to produce higher returns.
5. Unique.

ValuFocus is simple to use, because you visually compare current price to intrinsic value on a value chart. To avoid being simplistic, it hides all the comprehensive work necessary to produce the intrinsic valuations under its “hood.” Like a complex car, where you only need to know how to start, steer, brake, and accelerate, the value chart displays all the tools needed to select a stock to buy, sell, or short.

To complement ValuFocus, Bill Mahoney's writing style is conversational and therefore easy to understand.

The LCRT framework is conceptually sound—it is based on cash flow and the balance sheet, not earnings. Firms fundamentally create wealth by investing in strategies that produce rates of return above investor cost of capital return requirements.

The conceptual framework is empirically validated through extensive research with multiple models. Empirical validation includes measurements combined in ways not previously employed to our knowledge—robustness, lack of bias, accuracy, and predictive capability. Model parameters are based on 50 percent under-/50 percent overvaluation, not traditional least squares statistical approaches. ...

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