Businesses Priced Like Betting Slips
As a value investor, I am often admonished for missing out on great companies with great products. Facebook (FB) has a billion users and is the new face of technology! LinkedIn (LNKD) is the future of networking and job search! What about game changers like Amazon (AMZN)? It moved from paper to bytes and killed big retail for books and electronics.
All of this is true, but there is another truth that needs to be considered. These are great companies and they all have value as businesses. But when I evaluate a stock, I calculate the tangible book value, an estimated liquidation value, a financial value and strategic acquisition value based on current multiples and an ongoing intrinsic value. My models may not be the most eloquent, but by the time I am done, I have what has proven to be a really good rough estimate of what a company's business is really worth. Most of these darling stocks are great companies but the price is far disconnected from business value they are little more than betting slips in my opinion....442 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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