I'd say something might have got lost in the wording/interpretation of the posts.
I don't believe that SCHW or other asset managers can be evaluated by book value. However, if the question was more 'are there offsets to cash', then book value is a good number to look at. That's what I looked at anyway in Yahoo. Yahoo shows cash/sh. about $19 with not much "total debt". But book value is only $3/sh. That seems screwy to me. Bv can't be so low if cash/sh. is so high with not much debt. (???) So I figure right away there has to be offsets to that $19 cash/sh which causes that low book value. Offsets that Yahoo doesn't show. Maybe something like lots of that cash held for customers (as an asset) with an offsetting current liability (that cash to be claimed by customers). But something.
I value asset managers by AUM, 'assets under management'. Going back several years, with the data I've found, asset managers were being bought out at 1.5%-2% aum. So that's where I've tried to be a buyer (under 1.5% aum). Last year I had several discussion on the Crossy thread with him and others. Apparently I'm totally wrong in my number. Buyouts and/or analyst valuations are at a much higher figure these days, with some rapidly growing asset managers being considered 'undervalued' at 10% of aum. I don't like that high number; it scares me. When one does look at history through, some of these companies always seem to do well -- better stock performance over decades than Buffett's Berkshire. And so recently, wrong though I have been in my opinion of value, I have gone on and bought a few of companies with 'high' (imo) aum.
I don't understand SCHW to value it. It consists of several businesses, and they're in the process of divesting themselves of a signifcant aum part (U.S.Trust Corp). (Aside: it looks like U.S Trust has "over $100B in aum" and is being sold for $3.3B). From their latest p.r. I see "The firm's (i.e SCHW's) assets under management from clients of independent advisers at the end of the year rose 23% from 2005 to slightly more than $500 billion." If I value this at 3% ($15B) but the whole firm at my preferred (but maybe wrong 2%), that's 2% of $1.2Trillion (from SCHW website), that's maybe $24B. About the current market cap. So I'll call SCHW fairly valued now and pass for a buy. (I'm in the sector elsewhere.) OTOH, that growth was 23%, there is a number of reasons to believe it could continue, and for ltb&h people, for asset manager stocks it's been a question of just being in and staying in, not worrying about fair value/undervalue/over value. Back on the the other hand though, SCHW is in the brokerage business importantly too (not just an aum company), and SCHW has had significant misteps before (which cratered the stock price).
All jmo, and I've been wrong many, many times. Especially in my comments about this sector. |
