ValuFocus Investing: A Cash-Loving Contrarian Way to Invest in Stocks

Section Four

Explaining LCRT's Conceptual Framework in Detail

Section IV covers a series of chapters to explain LCRT's conceptual framework in more detail.

Chapter 12:	Our Approach
Chapter 13:	Focusing on Price Formation
Chapter 14:	Our Automated DCF Model—The Better Model
Chapter 15:	Getting to Know Our LCRT Model
Chapter 16:	Digging Deeper into the LCRT Model
Chapter 17:	Putting Our Valuation Proposition into Perspective

Chapter 12: Our Approach

1. Focus on cash flow, not earnings.

2. Terminal values are extraordinarily sensitive to input assumptions. Empirically test their structure with historical data to assure that they are unbiased and accurate.

3. The foundation is intrinsic valuation derived from automated discounted cash flow to estimate where price is likely to head in a price formation process.

4. Price change momentum fails to analyze the fundamentals.

Chapter 13: Focusing on Price Formation

1. It's all about money. Businesses need cash to compensate the owners, managers, employees, and consultants; pay for supplies, equipment, facilities, and support; meet tax obligations; invest in research, new products, production, marketing; and hire more people to grow.

2. Our models are designed to select stocks based on fundamentals, not market behavior, mainly overreaction focused on earnings. There always will be room for continuing improvement. Valuing a company never will be a perfect process.

3. Cash-loving true contrarians are willing to bet against ...