Discount to Net Asset Value | Protecting Your Downside

One way to value a stock, especially those of companies that own various subsidiaries or a portfolio of assets, is by analysing the company's discount (or surplus) to Net Asset Value.

Conglomerate Discount - The Case of Exor

We recently took a close look at Exor N.V., the holding company that controls such publicly traded companies as Fiat Chrysler Automobiles, Ferrari and CNH Industries. Conglomerates like Exor are interesting to analyse as they tend to trade a steep discount the mark-to-market Net Asset Values (or market adjusted book value).

In the case of Exor, the company trades at about 30% discount the market value of assets on the balance sheet. 

Point of Maximum Pessimism - The Case of Dundee Corporation

If you are a Contrarian Investor, you are trying to go where other investors feel extremely uncomfortable to be. You are trying to go where others are running to the exits, but at the same time, you don't want to be too early. 

One of those situations is materializing at a Canadian Asset Management Company called Dundee Corporation. After a series of unfortunate events (and decisions), the market capitalization of Dundee is gone from about a billion dollars to about $74 million. 

The company trades at a steep discount to book value, but for good reason. The company has been haemorrhaging money as failed investments have sucked up cash and destroyed shareholders capital. 

But investors may have overreacted. Even though the company is taking drastic steps to turn the business around, Dundee's stock is trading at about 70% discount to book value. If the company manages to stop the bleeding, a significant re-rating might be in the cards. 









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