Meet the dean of valuation - Aswath Damodaran

Meet the dean of valuation - Aswath Damodaran

by 5paisa Research Team Last Updated: Apr 04, 2022, 01:02 PM IST

Owing to his deep knowledge and expertise on valuation, Aswath Damodaran has been christened as the "Dean of Valuation".

Aswath Damodaran is a professor of finance at the Stern School of Business at New York University, where he teaches corporate finance and equity valuation. He has written over 20 books to date that includes, Applied Corporate Finance, Damodaran on Valuation: Security Analysis for Investment and Corporate Finance, Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Narrative and Numbers: The Value of Stories in Business to name a few. 

He has won the Richard L Rosenthal Award for Innovation in Investment Management and Corporate Finance and also the Herbert Simon Award. Damodaran regularly blogs about his views on the ongoing developments in the market on "Musings on Markets", which is a popular website on investing.

The secret to being a successful investor 

Aswath Damodaran strongly believes that humility is the single most important characteristic required to be a successful investor. In his latest webinar- The Illusion of Smart Money, he classified the investors into two groups- the humble and the arrogant. The humble investors are the ones who recognized success as a function of luck as well as skill and failure as a part of investing and an occasion for learning. On the other hand, he described the arrogant investors like the ones who viewed success as a function of their skill alone and took failure as a humiliation. Furthermore, if given a choice to pick someone to manage his money, he would select someone humble, since he believes that humble investors are less likely to overpromise and overcommit.

Talking about the rise of crypto assets, in an interview with CNBC TV18, he called cryptocurrency the millennial gold. He further revealed that he is not a market-timer and that he is still invested in stocks that he believes can deliver reasonable returns.

The Zomato IPO pricing debate

While talking about Zomato IPO, in an interview with CNBC TV18, Damodaran advises staying away from metrics that scale to current earnings, irrespective of the company because it will lead to absurd valuations. The reason is that investors buy for the future potential of the company, not the present and that future potential should seem reasonable. Speaking about Zomato, he said that while the company leads the online food delivery market, which holds great growth potential, two important factors need to be considered for tapping into this potential. Firstly, the growth of the Indian economy, as the rise in demand for online food delivery requires a rise in disposable income and secondly, the change in food habits of Indians.

Upcoming IPOs

Commenting on the upcoming IPOs of Paytm and Ola, Aswath Damodaran would prefer to invest in Paytm IPO over the Ola IPO. In an interview with Business Today, the professor believed that the former has potential as the financial services and payment processing business is huge. On the other hand, the ride-sharing business is a catastrophe globally and there is no stickiness in the market. Hence, if he has a choice, he would prefer to invest in Paytm IPO, provided that it is priced reasonably.

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