The Value Investor v.28 Non book values

Värdeinvestering is, of course, especially to find the hidden values, such that the market will not have discovered or, in any case not have counted in full. Hopefully there are not so many who believe that a company’s values reflected in the balance sheet with any greater clarity. So it is not even on the many important assets of course are listed there. Anyway, it feels that these factors may well a large impact when analysts are looking at the company. The reason for this is probably not that you do not see the other values, but that because t.ex. the brand can’t be quantified or counted on so it will be, and many similar values undanskuffade to phrases if even that. It is not a direct price/book, who made that Coca-Cola has been a fantastic investment over the last century.

For a värdeinvesterare it as I see it, to find the values that are most important for the future of the company, regardless of where they are. In my experience, it is usually factors that cannot be counted on, which determines which companies dominate in the decades while the challengers only get to dance a summer. Because t.ex. the brand or the corporate culture that said not to count on so you have to rather philosophize about their meaning in order to get a sensible view. Of course, there can seem fuzzy, but it is hardly. Rather, it is a device which analysis if one does not take into account these values without just counting on the key performance indicators and similar parameters.

Among the values you can find when analyzing a company is perhaps the brand name the most obvious. Coca-Cola, LVMH, Starbucks, Apple and even Swedish Kopparbergs own, of course, very valuable brands that keeps competitors at a distance (see the post about moats). They have been built up over decades and it would probably take decades even for a competitor with massive resources to tear them down if even then, provided that no grotesque PR disaster occurred. Even if brands, of course, need to be cared for, they are hugely profitable for the company that owns it.

No one would wave away a strong brand impact, but what about other important values, it is probably less consensus around them, and it is here one can distinguish between the wheat and the chaff among the investors. It is only through in-depth studies and understanding of a company as you find these. A good example of such assets are ecosystems if built up by a company. It can be simple systems for the servicing of the company’s products, spare parts can only be purchased from their own company, renewable licenses that is required to actually be able to use the company’s products and services o.p.v.

However, it can be considerably more sophisticated systems and a good example of this, as it furthermore, there is an intense debate around the value of, is Apple’s (which I own) iOS. The one who does not understand its immense value and significance for Apple points out, be happy that iOS is ”free”, and is updated as free by all users of iOS products. However, it is far from the whole truth, because iOS is the foundation of Apple’s huge ecosystem of apps and services, most with very good margin, and the huge turnover that has made ”Services” to Apple’s second largest segment, only after the iPhone in importance for today’s Apple. It is thus a crucial factor as to why Apple succeeds in locking in their users so that they upgrade the hardware again and again instead of seeking to (cheaper) competitors.

Another alleged fuzzy value of enormous significance for some companies is what they have done in the past that may not be evident in a market that most are concentrating on the news. Disney, for another very well known global company, has that familiar an unerring ability to find at new movies and characters. What you might not think about when you just look at the attendance for their latest blockbuster movie is the value of the ”old” successes. These continue to generate revenue in many different forms in the decades after most of them have half-forgotten them. Disney has also in recent years multiplied the ”socket” from these rights by making new variants on the old assets in computer-animated form.

One last example of hidden assets is the corporate culture. Very popular company to work manages to both recruit and retain talent significantly better than companies without this. In addition, it produces the staff, of course, better if you feel that you are part of something great, just look at how gigantic a lot Elon Musk has gotten out of her in the context of the minimal staff of Tesla and SpaceX, how much Steve Jobs got out of his staff that wanted to change the world at Apple in the early PC era. It is easy to find these companies – it is often done surveys of most popular companies to work for in a country or globally. H&M has benefited from its popularity in Sweden, Google and many others in the united states.

The world’s most popular employers.

There are of course lots of more or less hidden values in successful companies and these are just the ones that I found to be most useful to locate and try to estimate the value of. However, it is necessary to find and make a decent assessment of these if you want to be able to find discrepancies between company price and their value, i.e. what is the basis for all värdeinvestering.

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