tag:blogger.com,1999:blog-7294165939647321702.post6382870322227193300..comments2024-03-28T13:45:43.362-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: What's Book Value Worth?Saj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7294165939647321702.post-24561486045099442252015-11-20T19:11:40.610-05:002015-11-20T19:11:40.610-05:00Hi John,
This was a long time ago! I think I prob...Hi John,<br /><br />This was a long time ago! I think I probably used Yahoo price data and got the book values from financial statements.<br /><br />I agree with you that book value is a good proxy for these guys, and that one probably shouldn't expect intrinsic worth to be too much higher than book value for these companies.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-51116721796550649462015-11-17T10:21:27.294-05:002015-11-17T10:21:27.294-05:00Saj, nice post as always. I just came across this ...Saj, nice post as always. I just came across this doing some research on the builders. I'm curious where you came across the historical P/B ratios of the homebuilders? I've also been spending time thinking about the economics of the business, and I find it hard to understand why these companies should trade much more than book. I know they more often than not do trade at premiums, sometimes significant premiums to book, but other than when land is really understated (which doesn't seem to be the case since most of them cycle through their inventory relatively quickly), I'm not sure why these companies would ever be worth more than book. It seems to me that they are in a never ending cycle between using up cash to build inventory during good times (when cash flow is low or negative and supported by additional borrowings) and then at some point they finally make cash flow by selling down inventory. Often the cash has to be used to pay back debt, but then they are back to square one and have to start over, since they need inventory to sell. I guess I'm surprised at how often they trade at substantial premiums to their book values, and how volatile their valuations are... John Huberhttp://www.basehitinvesting.comnoreply@blogger.com