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As a shareholder how do you access that value without stock market shenanigans coming into play? The only two that come to mind are companies about to go bankru

by j4yav 6y ago

As a shareholder how do you access that value without stock market shenanigans coming into play? The only two that come to mind are companies about to go bankrupt, or a careful focus on dividend value (but dividends may not pay out the value of their static assets without having to sell them.)

notahacker 6y ago
If you've got a company which is worth a billion dollars in assets but is in too unfashionable an industry to be trading at more than half that in stock (and there isn't a more obvious problem you've missed like unsustainable debt), someone will eventually buy it to liquidate those assets, and earn the holders a nice little profit on the way. And value investing is all about the other side of the beauty contest - looking for the companies investors don't think are handsome which are strong enough to end up generating the sort of profits that will eventually lead investors to conclude they're not that ugly after all. The irrationality is more on the upside: tech stocks whose fundamentals make little sense you suspect will go up in value in the short term anyway because of FOMO. A lot of people have made fortunes on those kind of bets, and there are definitely people day trading WSB hyped stocks who don't forget to sell.
criticaljudge 6y ago
By forming an interest group with other shareholders, so that you have enough votes to determine what happens with the companies assets (in an extreme case). You also have some legal rights as a shareholder. I don't know about the US, but for example in my country there is a LEGAL requirement for companies to maximize shareholder value. Few people seem to know when they blame capitalist greed, when really it is a government law. So you can sue the company if you think they mismanage their assets. Of course there are ways for companies to rip off shareholders. I think there is an old Philip Greenspun article about it, iirc he mentions buying expensive furniture and artwork for the offices. I suppose it is part of the due dilligence before investing in a company, to check how they spend their money.
- IgorPartola 6y ago
  I believe that is the case in the US also and it results in extremely poor company behavior. I would rather invest in companies that prioritized doing the right thing to maximize long term profits than companies just try to maximize the next quarter’s returns.

by j4yav 6y ago

notahacker 6y ago

If you've got a company which is worth a billion dollars in assets but is in too unfashionable an industry to be trading at more than half that in stock (and there isn't a more obvious problem you've missed like unsustainable debt), someone will eventually buy it to liquidate those assets, and earn the holders a nice little profit on the way. And value investing is all about the other side of the beauty contest - looking for the companies investors don't think are handsome which are strong enough to end up generating the sort of profits that will eventually lead investors to conclude they're not that ugly after all. The irrationality is more on the upside: tech stocks whose fundamentals make little sense you suspect will go up in value in the short term anyway because of FOMO. A lot of people have made fortunes on those kind of bets, and there are definitely people day trading WSB hyped stocks who don't forget to sell.

criticaljudge 6y ago

By forming an interest group with other shareholders, so that you have enough votes to determine what happens with the companies assets (in an extreme case). You also have some legal rights as a shareholder. I don't know about the US, but for example in my country there is a LEGAL requirement for companies to maximize shareholder value. Few people seem to know when they blame capitalist greed, when really it is a government law. So you can sue the company if you think they mismanage their assets. Of course there are ways for companies to rip off shareholders. I think there is an old Philip Greenspun article about it, iirc he mentions buying expensive furniture and artwork for the offices. I suppose it is part of the due dilligence before investing in a company, to check how they spend their money.

IgorPartola 6y ago
I believe that is the case in the US also and it results in extremely poor company behavior. I would rather invest in companies that prioritized doing the right thing to maximize long term profits than companies just try to maximize the next quarter’s returns.