How to tell a solid company.

Brumby

Well-known member
May 25, 2012
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#16
An extreme example but it does happen, yahoo had their Alibaba holding valued at £2bn on their statement but was closer to £20bn odd if I remember correctly.
There are situations when the market value of a fixed asset is much higher than book value, such as when the market value of an office building skyrockets due to increased demand. In these situations, there is no way under Generally Accepted Accounting Principles (GAAP) to recognize the gain in a company's accounting records. However, revaluation is allowed under International Financial Reporting Standards (IFRS).
The arqument IMO ultimately rest upon whether you believe in the market efficient hypothesis.

The Yahoo valuation and its investment holdings in Alibaba came into sharp focus when it divested its internet business to Verizon and basically leaves it as an investment holding company. The market greatly discounted its valuation in Alibaba because as an investment company Yahoo is subject to 36.5 % CGT if it ever disposes off its holdings in Alibaba.

The notion that one can comb through the investment universe to find gems that are undervalued because the market is inefficient may exist but I would question whether such an approach is highly dependent on luck and ultimately a question of effectiveness.
 
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bluebellmk

New member
Apr 2, 2018
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#17
The arqument IMO ultimately rest upon whether you believe in the market efficient hypothesis.

The Yahoo valuation and its investment holdings in Alibaba came into sharp focus when it divested its internet business to Verizon and basically leaves it as an investment holding company. The market greatly discounted its valuation in Alibaba because as an investment company Yahoo is subject to 36.5 % CGT if it ever disposes off its holdings in Alibaba.

The notion that one can comb through the investment universe to find gems that are undervalued because the market is inefficient may exist but I would question whether such an approach is highly dependent on luck and ultimately a question of effectiveness.
I'm sure Buffet, Klarman & Co show that the market does indeed have inefficiencies that can be exploited
 

Brumby

Well-known member
May 25, 2012
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#18
I'm sure Buffet, Klarman & Co show that the market does indeed have inefficiencies that can be exploited
Value investing is sound conceptually but the issue is one of execution. IMO, an individual investor lacks the resources or requires disproportionate expense in time and resources for an outcome that might well be unknown. The problem with the Buffet example is proof of concept but exemplify that success is not necessarily transferable because we will have many Buffet live examples. It should also be noted that because Buffet has deep pockets, he makes strategic investments into target companies. That means, he is able to transform board representation, reform management and dictate business direction so that true value is extracted from under performance. An individual investor cannot exploit inefficiencies unlike the way Buffett can.

If you are able to execute value investing efficiently and cost effectively then by all means carry on with what works for you. Just because Buffet can do it successfully doesn't mean such execution is transferable.

I have an actual example in my own portfolio. I invested in a property trust company that invested substantially in commercial real estate in Japan during Japan's deep recession. When I invested, I had a view that Japan will come off the long recession and commercial properties will rise in value over time. Unfortunately even though the property market did come off from its low, the market continues to trade the shares at a discount against both nta and market valuation. Additionally, the discount is even deeper when currency factor was incorporated. I had to hold it for years and only managed an exit at a significant premium when Blackstone bought the whole portfolio.
 
Likes: Kaeso
Apr 19, 2018
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Leicester
#20
What numbers should I look at to determine a solid and a good company to invest in, that won't go down drastically in price (or even go to zero and fold)?

...and where do I go to get the numbers on the web?

If it is not so simple as that, could you recommend an easy to read book on the subject please?

Thanks in advance for helping out a newby...
There are many things to look at and I must admit I don't fully understand It all myself.

personally I wouldn't recommend what you should look at just recommend that you learn what the fundamentals are. if you don't know what they all mean then someone telling you what to look at isn't going to be of any use in my opinion.

If you're Uk based the london stock exchange is a good place, it has all the company fundamentals and you can begin to look into trends and work out what you may want to look at, as people MAY hold more weight to different parts of fundamentals than others.
 
Dec 4, 2017
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#22
I don’t trade stocks .....if I were asked to invest and had to chose stocks I would be looking much more strategically.

I would look at the sector first and choose those that will prove robust over the trading horizon

Then it would be companies with the track record of success and with a good management team in place

Companies are run by people so I have to see good directors at the healm

N
What do you trade NVP and why ?
I am thinking of Forex myself over stocks...