Tag Archives: Hudson General

VALUATION from a Strategic Perspective: Improving Investment Decisions

Chapter 16 from Competition Demystified

By now you realize that you need to focus most of your attention as an investor on understanding the particular business, the industry and the competitive interactions within an industry before plugging inputs into whatever valuation model you use. Seek first to understand then value. Often Wall Street places the cart before the horse with its analysts’ projections of earnings and price targets.

After finishing our tour through Competition Demystified, I will ask readers if they want to go deeply into valuation. This chapter gives you a preview of the major issues.

Here are your study questions:

  1. What are the three major shortcomings of using the NPV approach to valuing companies?
  2. In an earnings power calculation, what are the six (6) adjustments you need to make to the current cash flow to arrive at an accurate estimate?
  3. What are the two ways to value a company’s assets?
  4. The difference between the asset value and the earnings power value is evidence of what?

For those who want a thorough review of valuation case studies from this blog, here they are. If you go through these carefully, you will have the foundation of an MBA course on valuation.

Preview

Greenwald VI Process Foundation_Final

Greenwald_2005_Inv_Process_Pres_Gabelli in London

SEALED AIR VALUATION

Sealed Air 1998 10-K

Greenwald_Class_Notes_6_-_Sealed_Air_Case_Study

Sealed Air Case Study_Handout

 Hudson General Valuation

Hudson General Case Study_Read this First

Valuing Hudson General and Analysis

Liz Claiborne

Greenwald Class Notes 5 – Liz Claiborne & Valuing Growth(2)

See you at the end of this week!

Valuing Assets: Hudson General Valuation Case Study

When you look at a business, glance at the financial summary to gain a feel for the financial characteristics of the business, then go to the balance sheet. Or you can start with the balance sheet. Wall Street analysts often spend too much time on the income statement without looking at quantity and QUALITY of the assets that generate the income and cash flow.

Below is the link to the 1997 10-K of Hudson General Company.  Try to value this business and show your work.

http://www.scribd.com/doc/66990171/HUDSONGENERALCO10K405-1997

If you struggle, you can go to the book: Value Investing from Graham to Buffett and Beyond by Bruce C. N. Greenwald and read Chapter 4 starting on page 51.

The complete analysis will be posted in a few days.

June 4, 2012: Here is the analysis. (DON’T CHEAT. Try on your own first)

Hudson General Case Study_Read this Second

Valuing Hudson General and Analysis

Good luck