Investing by the Book
With equities in the U.S. enjoying a nice climb, seeking out investment ideas becomes more difficult. In a market environment like this, it doesn't hurt to go back to an old-school Ben Graham investing approach: buy assets for less than asset value. While Graham really loved to buy companies trading for less than net asset value, I'll examine names that qualify by trading for less than book value, and in most cases, less than tangible book value.
The market is not dumb. When businesses are trading for less than book value, it's usually a signal that the market has little confidence in the value as stated, and the ability for those assets to deliver earnings growth. But Mr. Market can be emotional and not value businesses on a rational judgment. For investors, it's a matter of patience. For example, a couple of years ago, Mr. Market was not a fan of oil refiners and, as a result, many major refiners were trading at a fraction of book value. Never mind that it took years and hundreds of millions, if not billions, of dollars to build a refinery. Tesoro (TSO), for example, was trading for less than 40% of book, around $15 a share, in late 2010. Today, the stock fetches $41 -- a 40% premium to book. Patient investors were rewarded with a 200%-plus return on investment....393 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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