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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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Chapter 17

Putting Our Valuation Proposition into Perspective

A summary of the entire proposition should help you form a perspective to convince you to follow our approach and give you the basis to do so.

1. Wide acceptance of the discounted cash flow (DCF) model has produced complacency. For years now, the model has held its place in the stock investing world. It is used nearly exclusively by a relatively small percentage of the universe. It is used widely only as tiny part of a multifactor approach. It is rejected outright by those who love earnings or indexing. Also rejecting DCF are those who mainly trade daily on market behavior or sentiment. As a result, its usage has stagnated, with little work done to overcome the model's flaws.
2. However, the LCRT research platform thrusts the economic, cash-based stock investing methodology forward, providing a way to empirically test for reasonableness. Right here we need to emphasize the importance of this reality. We must convince you of the reasonableness of the model to get you to use it—to replace whatever method you are using now, or, if you have been shying away from stocks, to persuade you that you can invest successfully in stocks by applying our platform.
3. Different analysts using DCF can honestly arrive at significantly divergent company values. That truth certainly has been evident in the market, forever. It is in most investors' best interests to tighten the market, reduce the volatile swings that characterize it today, ...

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