Book Value

Book Value is a company's Total Assets minus Total Liabilities. It is equivalent to Total Equity or Shareholders' Equity. If the company was liquidated, the Book Value would be the money the shareholders will receive.

Increasing Book Value is a good thing. Decreasing Book Value is a bad thing. A good company has an increasing Book Value over time because it is paying down its debt and buying other great businesses. A bad company has a decreasing Book Value because it is acquiring more debt to keep its business afloat.

Comparing the company's Market Capitalization to its Book Value may indicate whether the stock is overpriced or undervalued. This comparison is the Price to Book (P/B) Ratio. Most companies have a ratio of greater than 1. However, a ratio of less than 1 could be a buying opportunity of a lifetime.

The Price to Book Ratio can be used to determine the True P/E Ratio of a company's stock portfolio. Just multiply the company's Price to Book Ratio by the P/E Ratio of each of the stocks it owns. This will tell you how much you are really paying for the company's stock portfolio. For example, if Berkshire Hathaway's Price to Book was 2, and Coke's P/E Ratio is 20. The True P/E of Coke would be, 2x20 = 40, for each Berkshire Hathaway share. A good opportunity to by Berkshire Hathaway shares is when the Price to Book Ratio is close to 1, or better, less than 1.

 

My Financial Analysis of Stocks

  • Sold All of L Brands (LB) and Park Hotels and Resorts (PK) An article in CNBC scared us. The parent company of Victoria Secret, L Brands (LB) could be a broken company.https://www.cnbc.com/2018/05/24/victorias-secret-might ...
    Posted Jul 26, 2018, 3:41 PM by Intelligent Investor
  • We Sold All of Our Shares in PayPal, We Saw Something Else We Liked Better We dumped Paypal (PYPL). The P/E Ratio is currently at 66 which is very high. The slowdown in earnings and revenue does not justify a P/E Ratio that ...
    Posted Feb 3, 2018, 8:18 AM by Intelligent Investor
  • U.S. Bank's (USB) Return on Equity is Greater than Wells Fargo (WFC) We just realized that U.S. Bank's (USB) Return on Equity is the highest out of all the major banks. It is greater than Wells Fargo (WFC), J.P ...
    Posted Feb 3, 2018, 8:20 AM by Intelligent Investor
  • My Research 2017 View Analysis: My Research 2017
    Posted Jan 15, 2018, 4:12 PM by Intelligent Investor
  • Looks Like Capitulation in Viacom (VIAB) Capitulation is when large institutional investors give up on a stock and sell all of their holdings in that stock. Capitulation is a sign of a bottom for a stock ...
    Posted Nov 17, 2017, 10:38 AM by Intelligent Investor
  • IBM's Fortunes Finally Turns Around Today Warren Buffett purchased IBM shares in the year 2012 worth billions of dollars. Yet the stock has pummeled and has been pounded downwards for the past 5 years. The company ...
    Posted Oct 20, 2017, 1:58 PM by Intelligent Investor
  • Exchanged AT&T (T) for Time Warner (TWX) and Dumped Hilton Worldwide (HLT) I exchanged AT&T (T) for Time Warner (TWX). Their merger currently gives TWX a 6% premium. AT&T is offering $107/share for TWX. Time Warner is currently priced ...
    Posted Sep 1, 2017, 4:36 PM by Intelligent Investor
  • My Stock Holdings 2017 View Analysis: My Stock Holdings 2017Hilton Worldwide Holdings (HLT) split into 3 companies. So we now own the following 3 Hilton companies:1) Hilton Worldwide Holdings (HLT)2) Hilton ...
    Posted Aug 28, 2017, 6:46 PM by Intelligent Investor
  • Repurchased Apple After Warren Buffett Confirms He Purchased it As a rule-of-thumb, if an investment has a Return on Equity (ROE) of greater than 30%, it means the company has a Durable Competitive Advantage. Apple's Return ...
    Posted Jun 5, 2017, 12:35 PM by Intelligent Investor
  • Purchased Hilton Hotels in Anticipation of a 3 for 1 Stock Spin-Off Last December I purchased Hilton Hotels in anticipation of a 3 for 1 stock spin-off. In other words, Hilton Hotels will be splitting into 3 independent companies. The most ...
    Posted Mar 1, 2017, 6:12 PM by Intelligent Investor
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