The answer – apparently – is just about any business that has a strategy of acquiring other businesses.
|Example - Finding A Company\'s Net-Net|
ABC Company has the following balance sheet and market capitalization:
Cash Equivalents $50
Accounts Receivable (A/R) $100
Total Liabilities $300
Share Price $62.50
|Example - Taking the Value of Long-Term Assets Into Account|
In the ABC example, we gave absolutely no value to the company\'s long term assets. Let\'s return to the example and suppose that that the company\'s share price is now at $200. We calculated its net-net worth at $125, so according to that it would not be a good value, but we note that ABC also has the following assets on its books:
Plant, Property, & Equipment $200
Long-Term Bonds $100
“The new numbers don’t change my probability analysis,” Mr. Mehta said.
“Warren Buffett has been an extraordinary investor. But he hasn’t been doing
as well recently.”
Mr. Mehta’s calculations show that
over his first 25 years at Berkshire, Mr. Buffett’s average annual return was
- 24 percent using book value and 30 percent using market value, compared
with 10 percent for the S.&P. 500.
Over his second 25 years, his performance was still outstanding:
- 15 percent for book value, 14 percent for market value and 10 percent
for the index.
The last six years reveal a different picture:
- 13 percent for book value, 15 percent for market value and 17 percent for
That’s no disaster, but Mr. Buffett didn’t meet his own standard: He frequently
underperformed the market.