My Stock Market Valuation Methods
The stock market is more than a bank for me. I use securities to meet large and unavoidable cash outflows in my life. Therefore, I like to put my disposable cash in to securities which are actively traded on more than one stock market. Infosys is my favorite because I can use the shares to raise liquid capital at any time. It is also worth good money both in the United States and in India.
Another valuation tip which I would love to share with stock market friends, relates to details of assets in financial statements. Some of the best picks have realty tantalizingly undervalued since original and present market costs can vary so widely. Late 19th century companies in the emerging world are my favorites, with offices and factories worth many times the present value of projected cash flows from operations!
Conversely, I stay awake at night worrying about provisions. It is not just the ones mentioned in statutory stock market disclosures, but the ones which executives try not to mention at all! I guess I am still in the Union Carbide mode after Bhopal! Seriously, I think that the whole issue of product liability is understated in the stock market arena.
I love brands. They offer unique opportunities to value securities entirely differently from how the world at large sees them. When will accountants and regulators wake up to the incredible absence of the best assets any company has, from statutory reporting? A related tip: everything you spend on independent retail audits of brand shares and ranks will pay you off handsomely on the stock market!
Finally, a word of caution on valuation: be wary of voluble and high profile executives. It is one thing to communicate frequently and transparently with stake holders, but boasting and exaggerated claims only obfuscate the stock market picture. Is it a mere coincidence that most executives convicted for criminal roles in duping any stock market, are the ones with the most prominent profiles until their shady actions were uncovered?