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Strategies & Market Trends : Value Investing
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Lance Bredvold
petal
To: petal who wrote (66722)3/1/2021 12:29:37 PM
From: Madharry3 Recommendations   of 78774
 
Regarding book value. I dont think you can hang your hat too much on the value of non current assets. a lot of times that real value is a function of its ability to generate cash flow. In a former life as a bank loan review officer I had to look at loans made to different industries and see if they made sense. When I looked at our loans that were collateralized against ocean shipping vessels I discovered that the bank was not adequately compensated for its risk. We were making the loans believing that we had adequate collateral but in reality when shipping was in a down cycle shipping revenues dropped the shipping company could not pay the mortgage and the bank lost money after foreclosing on the ship because the value of the vessel also dropped.
My unpopular suggestion was that the bank raise rates and/or get an equity kicker because we were in effect a partner in the success of the business.. Similarly if you ever try to liquidate a business you will you will usually get much less for inventory and equipment that is listed on the balance sheet. In some cases the cost of moving the asset might exceed the value of the asset on the balance sheet. If I were your age I would look at what consumer good your peers are excited about. If I had bought dell stock when my wife bought a dell computer and apple stock when she bought an i phone I could have my own private island today.
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