In his book – Value Investing: From Graham to Buffett and Beyond, Bruce Greenwald recommends investors search for concealed value in assets under a rock. Here’s an excerpt from the book:
It may pay to strain the eyes and devote hours in the examination of a company’s financial accounts, searching for some formally legitimate figure that understates intrinsic worth. We can shorten the odds if we concentrate on firms with complex structures, multiple businesses, subsidiaries off on their own, and other features that confuse security analysts, and perhaps the company’s management as well.
Firms such as these present financial statements that may be full of places where undervalued assets can get lost, overlooked by the investment community and the chief executive-or, if not overlooked by the insiders, then secreted out of sight until they have the chance to get their own hands on the value. Whatever the proximate cause, simple companies produce financial statements with no place to hide.
Complicated organizations, by contrast, have financial statements full of dark corners and secret passageways, terrifying to the novice but potentially rich in treasure for the seasoned explorer.
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