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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Walter in HK who wrote (6502)	3/31/1999 4:47:00 PM
From: James Clarke	Read Replies (3) \| Respond to of 78517

The market currently trades at a higher ratio to book value than it ever did. And everybody just comes up with reason after reason why book value is irrelevant. Look at any stock that used to trade way above book value, crashed and now THE VERY SAME ANAYLSTS come back to you and say "Look at Agco - .4 times book value" "Look at Harnischfeger - .6 times book value". Book value often becomes more relevant than you could possibly imagine when times were good. Most of the stocks listed today will trade in the vicinity of their book value at some point in the next downturn. Think of book value as your downside risk (even though there's nothing stopping a stock from going below that) for the average business. (Not Microsoft, but take something like Merrill Lynch - $91.) I see no reason to believe that Merrill won't bottom at or around book value (which is about $27 - actually it almost got there last year). Or take a decent auto parts business like Dana (DCN). Sure, its "way down" at $37 a share, but in a recession it goes to book value ($18). Irrelevant? Yeah, I'm bearish. Sleep well. JJC