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Ford is hovering around a 1.0 price/book ratio and has dropped below that as early as 2018. Value is still out there. Then as now there are many reasons why pe

Ford is hovering around a 1.0 price/book ratio and has dropped below that as early as 2018. Value is still out there. Then as now there are many reasons why people won’t pay more at the present time for these stocks.

Hypx 7y ago
Yes, many value stocks are near the price floor, and have almost no room left to drop further. Of course, some of these companies are that cheap because they are basically the walking dead of companies (e.g. Gamestop). But for the companies that do have a future, now is a good time to invest in them.
hogFeast 7y ago
If you are measuring value with price/book, you have no hope. The conceit of the "value factor" is wrong-headed: trying to measure value quantitatively is like trying to measure the aesthetic appeal of art quantitatively. It just makes no sense. Quant screens turn up the most uninvestable garbage. The only people who invest that way, haven't ever looked properly at the companies they are investing in (I use value quant screens for shorts now, the flow of money into quant means they are usually comically overpriced). More to the point though: value is only determined in hindsight. A company trading on 30x earnings can be cheap. The only "value factor" that is closely correlated to returns is 5yr forward earnings. If you think a computer can predict earnings five years forward...great, but they can't. Also, if you aren't managing $10bn+ you shouldn't be looking at Ford. Don't make it difficult.
- Hypx 7y ago
  > Quant screens turn up the most uninvestable garbage. The markets right now are filled with uninvestable garbage. It's not a value-only thing. Any viable investment strategy is either a broad based passive investment, or one where you'll have to pick your stocks carefully.
- jdsully 7y ago
  Value investing as Graham and Dodd described it is a very specific strategy. Future earnings are hard to predict or calculate - but factories, land, and cash exist and have real value that is computable. Right now the market is saying one of two things with a 1.0 price/book: 1) Ford's ongoing business is currently worth $0 OR 2) Ford's capital assets are currently worth $0 It's much easier to make a judgement call on those predicates which are based in the present rather than predict the future.
robocat 7y ago
I think "Value" is virtually meaningless in modern businesses. In the past some businesses perhaps depended strongly on capital (e.g. machinery plus cash). Most modern businesses are simply not dependent on the value of hard capital goods, they depend on the value of their services. The book value of large businesses often contains so many instruments or contracts marked to market, that the book value is largely dependent on market value in disguise. Examples: TSMC, ARM, a local restaurant, PWC, etc. Perhaps an exception is real estate companies?
- kgwgk 7y ago
  If TSMC is Taiwan Semiconductor it doesn't seem a good example: they have in their balance sheet $35bn (more than half of total assets) classified as "property, plant and equipment" and their financial assets are just one tenth of that.
  - robocat 7y ago
    Book value. If you tried to sell the property, plant and equipment (without staff) then the market value would be a lot less. The plant is almost a sunken cost (e.g. 10nm plant for Intel is a sunken cost). The current market cap of TSMC is 210B - related to the value of its future expected earnings compared with other companies.
    - kgwgk 7y ago
      Yes, book value. You said “The __book value__ of large businesses often contains so many instruments or contracts marked to market, that the __book value__ is largely dependent on market value in disguise.” I thought TSMC was supposed to be an example of that, but its assets are cash and old-fashioned capital equipment mostly. Even goodwill is minimal.

Hypx 7y ago

Yes, many value stocks are near the price floor, and have almost no room left to drop further. Of course, some of these companies are that cheap because they are basically the walking dead of companies (e.g. Gamestop). But for the companies that do have a future, now is a good time to invest in them.

hogFeast 7y ago

If you are measuring value with price/book, you have no hope. The conceit of the "value factor" is wrong-headed: trying to measure value quantitatively is like trying to measure the aesthetic appeal of art quantitatively. It just makes no sense. Quant screens turn up the most uninvestable garbage. The only people who invest that way, haven't ever looked properly at the companies they are investing in (I use value quant screens for shorts now, the flow of money into quant means they are usually comically overpriced). More to the point though: value is only determined in hindsight. A company trading on 30x earnings can be cheap. The only "value factor" that is closely correlated to returns is 5yr forward earnings. If you think a computer can predict earnings five years forward...great, but they can't. Also, if you aren't managing $10bn+ you shouldn't be looking at Ford. Don't make it difficult.

Hypx 7y ago
> Quant screens turn up the most uninvestable garbage. The markets right now are filled with uninvestable garbage. It's not a value-only thing. Any viable investment strategy is either a broad based passive investment, or one where you'll have to pick your stocks carefully.
jdsully 7y ago
Value investing as Graham and Dodd described it is a very specific strategy. Future earnings are hard to predict or calculate - but factories, land, and cash exist and have real value that is computable. Right now the market is saying one of two things with a 1.0 price/book: 1) Ford's ongoing business is currently worth $0 OR 2) Ford's capital assets are currently worth $0 It's much easier to make a judgement call on those predicates which are based in the present rather than predict the future.

robocat 7y ago

I think "Value" is virtually meaningless in modern businesses. In the past some businesses perhaps depended strongly on capital (e.g. machinery plus cash). Most modern businesses are simply not dependent on the value of hard capital goods, they depend on the value of their services. The book value of large businesses often contains so many instruments or contracts marked to market, that the book value is largely dependent on market value in disguise. Examples: TSMC, ARM, a local restaurant, PWC, etc. Perhaps an exception is real estate companies?

kgwgk 7y ago
If TSMC is Taiwan Semiconductor it doesn't seem a good example: they have in their balance sheet $35bn (more than half of total assets) classified as "property, plant and equipment" and their financial assets are just one tenth of that.
- robocat 7y ago
  Book value. If you tried to sell the property, plant and equipment (without staff) then the market value would be a lot less. The plant is almost a sunken cost (e.g. 10nm plant for Intel is a sunken cost). The current market cap of TSMC is 210B - related to the value of its future expected earnings compared with other companies.
  - kgwgk 7y ago
    Yes, book value. You said “The __book value__ of large businesses often contains so many instruments or contracts marked to market, that the __book value__ is largely dependent on market value in disguise.” I thought TSMC was supposed to be an example of that, but its assets are cash and old-fashioned capital equipment mostly. Even goodwill is minimal.