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Stocks and Assets (Part 2)

28 September 2007 - Features - Editor

Stocks and Assets (Part 1)

Investment Reviews by Corporations in Which You Hold Stocks

Why is it that executives make more noises about prospective investments than about internal reviews of their past decisions in this area? We read, for example, extensively about Wal Mart’s machinations to enter India, but not much about why they withdrew from Germany and South Korea, with their tails between their legs! The entire globalization story needs a whole new approach when it comes to assessing investment strategies for stocks.

Asset valuation is complicated in the free world, but the matter can be especially hard to fathom when investing in stocks from emerging countries (Roland, 2004). Many of these economies are in transition from the socialist era, and may represent substantially lower values than originally presented at times of acquisition. Minority owners of companies must act like determined terriers to ferret out the truth when executives use precious funds to make forays in to strange territories!

True Asset Values in Your Stocks

One can carry on ad-infinitum, recriminating about the many ways in which small investors get sand thrown in their eyes, but what purpose does this serve? Suffice it to say that statutory reporting of asset values may be entirely misleading (Reed, and Lajoux, 1998). Many acquisition decisions in the corporate world are based on internal valuations being far higher than those reported on a corporation’s books. It is up to each of us to be vigilant and ask the right questions at crucial junctures. We may not always be heard, but can make some impact through persistence.

Use to share your experiences in this regard! Let us debate the real merits of investment decisions by companies in which some of us own stocks? Could there be better or safer uses for our funds? Have projected returns been met? Could some reported assets have spoilt or fallen below their reported values? Finally, we should never forget that the most valuable assets-brands-are not reported in statutory books at all, so we could easily miss some of the best alternatives for our hard-earned money!

Works Cited

Bennett, J, and Lippert, J, 2007, Chrysler LLC Proposes to Sell 2 Units, People Say (Update 2), 2007, Bloomberg web site, retrieved August 2007
Ramanadham, V, and Bennett, A, 1997, How Does Privatization Work? Routledge
Reed, S, and Lajoux, A, 1998, The Art of M&A: McGraw-Hill Professional
Roland, G, 2004 Transition and Economics, MIT Press
Net Asset Value, 2007, Securities and Exchange Commission web site, retrieved August 2007


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