Valuing a Net Net Stock – the lite version
Posted on | August 6, 2009 | No Comments
Yesterday’s post was missing something. How do you value Benjamin Graham’s “Instrinsic Value” of a company? I left it out for a reason. The answer is: it depends on who is doing the valuation and what tools they use.
Get this- some investor’s don’t value companies. They don’t care about it. Really.
These investors are often Technical investors, who are concerned with the signals that the market place is giving in such things as the volume of shares being trading, price movement etc. And although it may seem silly to put that much value in technical indicators, plenty of people have made money using these techniques. Don’t dismiss what you don’t understand.
Value investors like Graham are part of a Fundamentist tradition. Although, to my knowledge, none of them have strapped a bomb to their bodies, and walked into a crowded market. The fundamental investing tradition attempts to take the jumble of facts that comprise this thing called a company and distill it down to a number. The value. But not even fundamentalist investors agree.
Graham’s Instrinsic Value is different from Warren Buffett’s current idea of intrinsic value. And Buffett was a disciple of Graham’s for many years. The important thing to determine is a set of criteria that work for you to value a company. Some of these include Valuation based on Assets, or future income of the company, or liquidation value. Sometimes you are not valuing the company at all but on the different between what a stock is trading at and what it should be trading at, which is called arbitrage.
I called this the lite version because I am leaving out the numbers. That comes soon.
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