Andrew
Is there any websites that contains decent guides on value investing?
Answer
I would go to the book "The Intelligent Investor" by Ben Graham for value investing and indeed I would say you should always start with his framework as the initial screen. The book is dated from the 70's.
A more recent book with a good emphasis on value would be "The Dhandro Investor" by Mohnish Pabrai whose fund has had astonishing performance since inception in 1999. What's interesting is that he's integrated geometric/logarithmic risk assessments (aka the Kelly Criterion) into his frame work. Less then 10% of the business schools in North America teach such methods as they originated with mathematicians, physicists and engineers instead of with economists but the theories have proven themselves in many different fields.
I would go to the book "The Intelligent Investor" by Ben Graham for value investing and indeed I would say you should always start with his framework as the initial screen. The book is dated from the 70's.
A more recent book with a good emphasis on value would be "The Dhandro Investor" by Mohnish Pabrai whose fund has had astonishing performance since inception in 1999. What's interesting is that he's integrated geometric/logarithmic risk assessments (aka the Kelly Criterion) into his frame work. Less then 10% of the business schools in North America teach such methods as they originated with mathematicians, physicists and engineers instead of with economists but the theories have proven themselves in many different fields.
Price to book value ratio?
jim
I am trying to find out if a stock is undervalued, I have the formula and here are the numbers.
the current trading price is 0.54 cents.
total liabilities and shareholders equity is 5019.0
total common shares outstanding is 130.
so first i divide the liabilities and shareholders equity with shares outstanding and get 38.6
now i divide the trading price of 0.54 with 38.6 and get 0.013. so this stock is trading way below it should be right? The stock is below and I am not sure if liabilities needs to be included with shareholders equity but on the balance sheet it is.
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=VSTNQ&lstStatement=Balance&stmtView=Ann
Answer
Book value = [Net Value of Asset - Depreciation] / [No of outstanding shares]
To calculate Net Value of Assets you need to know two things
Shareholders Equity + Bank Reserves
Shareholders Equity = Total Assets (5019) - Debt (231)
Debt = Short term debt (225) + Long term debt (6) = 231
As the financial report says, I do not think this company has maintained any reserves. Instead their retained earning for lat five years has been negative.
Hence Total Book Value = 5019 - 231 = 4788
Book Value / share = 4788/130 = 36.8
Market price / share = 0.54 cents
Market price of this stock being so low than book value hints at some terrible problem.
You will observe this problem in their income statement.
This company has made loss (after tax income) in last 4 years. Which is a very bad sign Only this year it made some profits.
I am not sure about size, nature, fundamentals and market share of this company. If it has got a good brand name and recognition then I suppose this is an exccellent time to invest in it. But if it is not an established company please do not touch it/.
Book value = [Net Value of Asset - Depreciation] / [No of outstanding shares]
To calculate Net Value of Assets you need to know two things
Shareholders Equity + Bank Reserves
Shareholders Equity = Total Assets (5019) - Debt (231)
Debt = Short term debt (225) + Long term debt (6) = 231
As the financial report says, I do not think this company has maintained any reserves. Instead their retained earning for lat five years has been negative.
Hence Total Book Value = 5019 - 231 = 4788
Book Value / share = 4788/130 = 36.8
Market price / share = 0.54 cents
Market price of this stock being so low than book value hints at some terrible problem.
You will observe this problem in their income statement.
This company has made loss (after tax income) in last 4 years. Which is a very bad sign Only this year it made some profits.
I am not sure about size, nature, fundamentals and market share of this company. If it has got a good brand name and recognition then I suppose this is an exccellent time to invest in it. But if it is not an established company please do not touch it/.
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