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Strategies & Market Trends : Value Investing

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To: Alejandro who wrote (3731)	4/2/1998 11:33:00 PM
From: James Clarke	Read Replies (2) of 78525

Book value. Very very difficult topic. If it were so easy that you could just invest in low p/b stocks and make a fortune, the market would quickly figure that out and it wouldn't work any more. Forget the screens - you've got to THINK. When you look at a low price/book stock, put the balance sheet in front of you. Ask yourself, what are each of these items really worth. Cash - thats worth the number on the balance sheet. Inventories, fixed assets - those you really have to do some homework on. Goodwill? You've really got to be careful. Investing is not so easy that there is some magic formula. If you don't understand the business and don't understand what those numbers on the balance sheet really are (I'm not talking accounting - I'm talking receivables - receivable from whom? inventories - what are they and what are they really worth? factories - when were they built? are they worth anything to anybody else?) Why didn't I talk about the liability side of the balance sheet. Buffett said (paraphrased) "The liabilities are always real"

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