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Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, Cash Flow, Stock Price, Governance, and Special Situations Hardcover – November 9, 2010

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Product Details

  • Hardcover: 556 pages
  • Publisher: Bloomberg Press; 1 edition (November 9, 2010)
  • Language: English
  • ISBN-10: 1576603172
  • ISBN-13: 978-1576603178
  • Product Dimensions: 6.4 x 1.8 x 9.3 inches
  • Shipping Weight: 1.7 pounds (View shipping rates and policies)
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (3 customer reviews)
  • Amazon Best Sellers Rank: #893,870 in Books (See Top 100 in Books)

Editorial Reviews


"Bob Monks' new book, Corporate valuation for portfolio investment: analyzing assets, earnings, cash flow, stock price, governance and special situations, is a massive tome, weighing in at more than 550 pages that are really aimed at institutional investors...

The book is eminently readable, exhaustively treating the subject in simple but engaging language, and using practical examples wherever possible. It explains the concepts it uses as it introduces them. It is both ambitious and modest at the same time, covering all aspects of its subject, but disclaiming precision. It admits the hazards of ‘determining the present value of future worth’ and that, ‘despite GAAP and IFRS, financial reports remain only dim mirrors of company value’, stressing other factors ‘such as qualitative measures of corporate governance.’

Getting to the IR heart, the book claims ‘valuation begins from the hour a company’s leaders find equity investors who believe so strongly in the company’s economic prospects that they are willing to provide capital for it with no strings attached. This belief in a company’s future – this hope – is what makes the value of the stock something more than the current value of its assets if valued in a fire sale.’

Of course the book does, at length, consider the different ways to assess the qualitative aspects of a company’s value, but it also expands on that ‘hope’ that, ultimately, is the added value of good investor relations beyond sending out the spreadsheets. It is in that qualitative space where an effective IRO can tease out and illustrate the factors that are not susceptible to number crunching.

Although the book is officially aimed at fund managers, the authors do express the hope that others will find it interesting and of value. And they should. Its combination of penetrating insights that are sharply expressed and carefully built-up reasoning make it not only an amazingly readable work on one of the drier branches of the dismal science of corporate valuation, but also eminently well suited to analysts, IROs and others who want a refreshing and provocative look at their subject."
Ian Williams, Inside Investor Relations, December 3, 2010

Book Description

Every portfolio manager faces the same question every day: What is a company's true value? That value can be measured in many ways: assets, earnings, cash flow, governance, stock price, and more. Corporate value is a moving target, and it is clear that corporate valuation is easier to talk about than do. A realistic assessment of value is key to investing success.

This guide gives a comprehensive overview of corporate valuation. Institutional investors will find practical and insightful information to help understand and evaluate a corporation's value. The authors explain which elements matter most and how they should be analyzed.

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4 of 4 people found the following review helpful By James Mcritchie VINE VOICE on May 3, 2011
Format: Hardcover
From Enron to Lehman Brothers and the subprime financial disaster, we've seen the worst decade ever in my lifetime for equities, down 3.3%. Is it time to start stuffing our money into the mattress or is it time to learn something about corporate valuation from two experts?

Corporate Valuation for Portfolio Investment will inevitably be compared with Security Analysis: The Classic 1934 Edition by Benjamin Graham and David Dodd. Corporate Valuation comes out favorably.

Yes, we have learned a lot during the last seventy years; Monks and Lajoux take readers on a tour de force of valuation methodologies. If you only have one hour to read a book on investing, choose this one. You'll soon find it is worth the time to devote the additional hours or even days needed to plow through the remainder of the 550 pages. Written for financial professionals, most lay investors will also benefit greatly.

The authors cover the gamut. Let's take a look at the need to read between the lines to account for paradoxes in human behavior. Behavioral economics has become a field unto itself but the authors quickly walk readers through concepts such as:

* Reflexivity. The relative weight given to factors in valuation and investing are influenced by inherently biased investors because they are active participants, not objective observers. Perceptively flawed fundamentals are self-reinforcing, leading to boom-bust cycles.
* Keynesian beauty contest. Picking who you think others will pick leads to mediocre results.
* The winner's curse. The winner is more likely to overpay in a bidding contest.
* Cognitive bias.
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2 of 2 people found the following review helpful By Alfred Rappaport on December 20, 2010
Format: Hardcover
You can estimate the value of any asset, including corporate shares, by forecasting future cash flows and discounting them back to the present. Simple enough. Why then does it take this splendid book over 500 pages to help investors value corporate equity? The unavoidable answer is that corporate equity valuation is devilishly difficult. While a company specifies the interest cash flows and the date when it will repay principal for its bonds, its stock has uncertain cash flows, an indefinite life, and no provision for repayment.
Because of this greater uncertainty, stocks are substantially more difficult to value than bonds. But whether a company sells soft drinks or software, it is essentially worthless if it can't generate cash to fund it future growth and pay dividends. Yet most investors avoid the difficulty of forecasting long-term cash flows. They believe it's too speculative and time-consuming to be of practical use. Bob Monks and Alex Lajoux confront this dilemma by offering readers a range of valuation approaches based on earnings, assets, price multiples, and reverse-engineered cash flows. Most importantly, they do not hesitate to alert the reader to both the advantages and limitations of each approach. The appendices provide useful overviews of a range of topics including Monte Carlo simulations, basis accounting concepts, corporate financial reporting developments, and U.S. business cycles.
I enthusiastically recommend this book to professional investors, individual investors, and corporate managers who will find a panoply of useful ideas and tools between its covers.
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2 of 2 people found the following review helpful By steven schulman on December 16, 2010
Format: Hardcover Verified Purchase
This book provides a comprehensive overview of the necessary tools and diverse methods of valuing equity securities. The authors examine and explain the basic financial statements and key ratios that are employed in valuing stocks. They provide a comprehensive analysis of each of the primary methods developed for making valuations, including the use of multiples and comparables, technical analysis, the efficient market hypothesis, quantitative analysis and the capital asset pricing model. These methods are compared and critically analyzed. The authors deploy their extensive knowledge of corporate governance as a further criterion in assessing market values. The basic principles are extended into the specific contexts of mergers and acquisitions and insolvency/bankruptcy as another aspect of valuation. Extensive and up-to-date listings of sources are provided as well as a series of technical appendices addressing pertinent accounting and mathematical principles and an overview of financial models.

There are numerous ways to arrive at estimates of value and multifarious purposes for which this exercise may be done. This excellent book provides in a single volume the variety of methods that constitute the amalgam of professional and academic approaches to this pivotal topic. It can be used well by financial analysts, CFOs, public investors and other students of the field. I highly recommend this book to all such audiences.
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