Valuing companies not suited for value investing

[brattzz]

Try to play a fair price for a good company, not a good price for a fair company.

[SLC81]

I don't know if this is the right forum to ask but here goes my question. There are many companies with a wide moat (eg. Olam, Sembcorp, SMRT, Capitaland) which might not have good cash flow and consistent revenue, etc that value investors look out for. However, these companies can be very profitable for the long-term.

So, how does one go about valuing such companies that are pegged to Singapore/Asia growth story?

The essence of value investing is buying stocks at less than their "intrinsic value". Value Investors look for stocks that trade for less than their "intrinsic value", or stocks that the market has unfairly undervalued.

There are other investment style usually refer to as Growth Investing. Growth investors looks for companies with above superior growth even if price appears to be expensive

The Value Investing and Growth Investing seem to contrast each other but both methods operate on the premise that the market has mispriced a stock and to make profit when the stock becomes properly valued that is why Warren Buffet stated that "Growth and value investing are joined at the hip"

One popular method for growth investing is CANSLIM by William O'Neil.

Below is the book that i recommend to read.

http://www.amazon.com/How-Make-Money-Sto...0071373616

[FFNow]

The essence of value investing is buying stocks at less than their "intrinsic value". Value Investors look for stocks that trade for less than their "intrinsic value", or stocks that the market has unfairly undervalued.

There are other investment style usually refer to as Growth Investing. Growth investors looks for companies with above superior growth even if price appears to be expensive

The Value Investing and Growth Investing seem to contrast each other but both methods operate on the premise that the market has mispriced a stock and to make profit when the stock becomes properly valued that is why Warren Buffet stated that "Growth and value investing are joined at the hip"

One popular method for growth investing is CANSLIM by William O'Neil.

Below is the book that i recommend to read.

http://www.amazon.com/How-Make-Money-Sto...0071373616

Value and growth are intrinsically woven together and it cannot be separated. Value investors look for growth in the company they invest in. They wouldn't want to buy any company that is under priced and without any future growth at all . Likewise, growth investors won't buy a company at any exorbitant price so they will look for value in their buy too.

I have come across the the CANSLIM model you have mentioned and have glanced through the book before. Thanks for the recommendation anyway.

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Try to play a fair price for a good company, not a good price for a fair company.

Yes, that sounds like what Warren Buffett has said

[SLC81]

Taka666, Graham's principles such as Net-Net for value and CANSLIM by O's Neil for growth are methods that are quantifiable and can be applied easily by the mass regardless of the industry/graphical location where they are in. There are always companies/industries that if we base on those quantifiable methods we won't invest on them in the first place but it turns out to be very "profitable" if we do. For examples companies such as Facebook.. Well, i do not know any of such proven methods to value companies and you may well think about one for your own.

Back to your list i think OLAM fits well for CANSLIM.

I have been as much as you been trying to find those companies on the global scale ;-) LOL ever since dotcom, biotech and now cloud computing but It is hard to find few in thousands and thousands of companies and it has became very much a game of probability..or sometime people put it, a investing gamble

[Musicwhiz]

I have been as much as you been trying to find those companies on the global scale ;-) LOL ever since dotcom, biotech and now cloud computing but It is hard to find few in thousands and thousands of companies and it has became very much a game of probability..or sometime people put it, a investing gamble

I think it's not as hard as it seems if we have a set of criteria to follow and stick to it. From there, you can weed out many companies which do not fit, and then proceed to research those which do. Of course, this takes a significant amount of time!

[Bored in Melbourne]

This might be some help if you are interested in working out the value of a business

http://www.youtube.com/watch?v=Nc8rTFNqyww

[youcancallmecj]

Apart from value investing, we have other major kinds of perceived investment like growth investing and yield investing. As we all know, all of them contrast greatly not just by name, but how we evaluate them when we have intention to buy them.

Like what nick has previously mentioned, we can try analyzing cycles before entering construction companies or perhaps analyzing the value of greenback before investing in gold holding companies.

However, if value investing is what one's looking for, I think it brings down to the question of why invest in companies that are not suited for value investing?

[arthur]

If one is not into marcoeconomics, there's alot of difficulties in looking at cycles stages then.
Beside, economists are well known to be as accurate as the weathercasters reports.

Like wise to find a net-net company, its like having struck a 4D lottery. Easy to think about, hard to sieve through, even with stock screeners.
Those with net-net, I will likely to take with a pinch of salt regarding to their financial statements.

[LionFlyer]

Actually, this is a interesting topic because I was considering WBL (Wearnes).

How does one accurately value a company which is very much a conglomeration? Putting aside cash flow, do we consider the property currently held by the non-property side of the business? (eg the automotive arm)? Or the fact that it holds a huge chunk in MLFEX?

http://ir.mflex.com/stockquote.cfm

[redcorolla95]

This is very theoretical post.
The general idea is to get at a margin of safety, and the amount of effort needed to make such a valuation is can be vastly different.
Buffett saying: "Try to play a fair price for a good company, not a good price for a fair company" is an oversimplification - he was buying companies at 1x earnings when younger. People continue to make good money buying distressed stuff - which is usually crappy to start with.

Professionals invest in all kinds of complicated situations: banks (Buffett & successor, Temasek), conglomerates (Bill Ackman), energy (Li Ka Shing) etc etc

Very obvious situations: companies trading below cash, net-nets (incidentally of the S-chips found out for fraud, not too many were net-nets).
Moderate situations: companies trading below RNAV or some multiple of earnings
Not obvious situations: conglomerates, financials, distressed, etc

The not obvious situations can be valued by putting lots of time. Like counting all the properties and estimating all their values. For more specific examples, analysts attempt this all the time with conglomerates e.g. F&N, Jardine and then call it a 'sum-of-the-parts' valuation.

E.g. Bruce Berkowitz suggests that for him to analyze AIG he had to not have a social life
Seth Klarman had one analyst to do nothing for 3 years to analyze Enron debt
Most of us with day jobs shouldn't bother with the not obvious situations.