PT: You walked away with the wrong meaning. Grammar is deceiving.
P.T Barnam: What was meant by the words Now I have 6,000 sh and don't think I'm foolish, is a shortened way of me saying that communication companies are not valued like other companies are valued.
Normal companies are valued based upon net worth, What is owned less what is owed. The books are kept on the cost basis. So if a company bought a patent for $1.00, it would be valued at $ 1.00 on the books. However the patent may actually be worth $ 10,000,000. the books have to be stated at cost, not fair market value. That is what we see in the SEC reports, cost, not fair market value.
Regarding Nextel: Communication licenses (channels) are also valued at cost for accounting purposes. However, once the license is utilized it is worth lots more. The asset(license) is still stated at cost on the financials.
For example: A few years ago, a license cost less than $ 100.00. I know, I have one. However, the fair market value of a license is quite a bit higher. My license was worth approx. $10,000, without even being built out with equipment and operated. Hope you can see by my simple example that there is another way of valueing a comminucation company. This intrinsic value is not stated on the financial statements. Thus, the company's intrinsic net worth is much much higher than the financial statements indicate.
Now you know the reason that I am happy owning 6k of stock, even if I bought most at a higher than current market price. By reading and understanding the technical content of this thread, I have learned alot about valuation methods used for specialized industries.
I could have constructed this response much better if I had the time, and I hope it's clear enough to understand.
Regards
often misunderstood, Al |
