Recognizing Value Situations - Turning the Ship Around
Many companies go through restructuring, downsizing, and spinning off businesses deemed not vital to the core business. There is usually a "back-to-basics" and "focus" theme to these events, and they usually occur after extended periods of poor business results.
U.S. automakers (particularly Chrysler) went through this years ago and are obviously doing it again, exemplified by Ford's "Way Forward" campaign. Airlines have done it, albeit with mixed results, and it's likely that the banking and lending industrywill have to do the same.
Do turnarounds works? According to Buffett and many other professionals, generally not.
A few do succeed, and when they do, there's usually a big impact on shareholder value. It happened with Chrysler, and again with Hewlett-Packard (whose problems, notably, were not as severe).
Determining worthy value investments in these situations is difficult. Probably the best approach is to try to place a value on the core remaining business, as many did with HP's core printing business; then try to imagine how other units would fare either in a sale or with a successful turnaround. Again here, the work of professionals shouldn't be ignored.
Also read:
Recognizing Value Situations
Recognizing Value Situations - Growth at a Reasonable Price
Recognizing Value Situations - The Fire Sale
Recognizing Value Situations - The Asset Play
Recognizing Value Situations - Growth Kickers
Recognizing Value Situations - Turning the Ship Around
Recognizing Value Situations - Cyclical Plays
Recognizing Value Situations - Smoke and Mirrors
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment