ASWATH,DAMODARAN,FOR,HOME,ONLINE:,PAGE Headlines | Forestar Group Inc Stock - Yahoo Finance
mawatari.info . I had promised you in class on Wednesday that I would let you know when your final exam date was, as soon as I found out. Finally, the shenanigans at Yahoo! provide for interesting theater: a . Aswath Damodaran believes digital currencies will "sooner or later" is up more than 2, percent year to date through midday Tuesday. Yahoo was initially not in the news, but Alibaba, a company that Yahoo owns % of, was definitely the center of . Posted by Aswath Damodaran at PM.
I used the To illustrate the tangled web of values, here are the steps to get to the value of equity in Yahoo: In the case of Alibaba, it has no choice, at least on a part of the holding, since it will be required as part of a prior agreement to sell million shares after the IPO. If you are interested in Yahoo as an investment, there are three ways in which you can approach the analysis. You can estimate an intrinsic value for each of the three pieces and add them together to come up with a composite intrinsic value.
Now that Alibaba has filed its prospectus, you have the financial statements for all three companies. You can price each of the three pieces, by looking at a key metric revenues, earnings, book value and applying a multiple to it, based on how other companies like it and that is a subjective call are being priced in the market.
You can cheat and use the market pricing of one or more pieces to see how much you are paying for the rest of the company. In other words, you can check to see if the market is being internally consistent in its pricing of the pieces. Revenues have been declining at Yahoo! If there was any positive news about Yahoo! I will, however, assume that Ms. Mayer will find a way to stop the bleeding and that the company will muddle along as a mature company with stagnant revenues and stable margins.
You can download the parent company valuation by clicking here. A relative valuation pricing: You can anchor your relative valuation of Yahoo!
Wall Street's 'dean of valuation' says digital currencies are replacing gold
In particular, we would expect Yahoo to trade at a much lower revenue multiple than its competitors. Twitter is one of the outliers in the graph, but this graph was prepared before Twitter's fall from grace last week.
It is not as much of an outlier any more. In fact, the best fit line yields the following and you can download the raw data used for the regression here: Japan has had more success in the Japanese market, as evidenced in the graph below: Estimating an intrinsic value for Yahoo!
You can download the valuation of Yahoo Japan by clicking here.
Alibaba The final piece of the valuation is Alibaba, in whom Yahoo! Until last week, we were valuing Alibaba primarily through the financials that Yahoo was reporting for the company, since it was private and unlisted.
With the prospectus now in the public domainwe can be more specific in both the intrinsic and relative valuations of the company. You can download the Alibaba IPO valuation spreadsheet by clicking here. Advertising, Retail and Online Retail The range of values that you obtain, using these multiples for Yahoo! The bankers will undoubtedly gravitate towards earnings-based multiples and samples of internet firms as comparable firms during their roadshow. I would not be surprised if Baidu, the only other large, publicly traded Chinese online company that is structured similarly to Alibaba as a Variable Interest Entity is used for comparison and its pricing ratios are applied to Alibaba's metrics to arrive at value.
Baidu Multiples Applied to Alibaba; Enterprise values adjusted for cash, cross holdings and debt On second thoughts, given how low these values are, relative to the rumored IPO numbers, it is entirely possible that bankers will avoid talking about Baidu as much as they can, since it will not fit their pricing story.
Alibaba is not a publicly traded company yet, but there is no shortage of estimates of how much the company will be valued at after its IPO.
The rumored IPO estimates of equity value http: In each case, I have netted out the taxes that Yahoo will have coming due on the million shares of Alibaba that it will have to sell. Using the intrinsic value estimates that we have for the three companies in the mix, we can estimate an intrinsic value per share for Yahoo: The taxes were computed based on the capital gains, the difference between the assessed equity value for Alibaba and the book value from Yahoo's 10K for these shares.
Using the relative value estimates that we have for Yahoo, Yahoo Japan and Alibaba, we derive a relative value per share for Yahoo: There is a third twist that can be used to value Yahoo's equity. You can use the market pricing of Yahoo Japan and Alibaba to back out the value that the market is attaching to the parent company's operating assets.
To the extent that this may just reflect the possibility that we are misplacing the Alibaba IPO, I estimated the value of Yahoo operating assets as a function of the value of Alibaba equity after the IPO.
That's "market timing," and it rarely works. But any investor who missed the 10 days with the biggest gains would see their average return fall to 5. Those who engage in market timing may be out of the market after downturns, missing some of the best days while waiting for a recovery to be clearly under way. View photos road sign that says proceed with caution and has arrow pointing to the right More Image source: What to do before a market crash So what should you do, if you're anticipating a market crasheven if it turns out to be several years away?
You have two key options: You might take some strategic actions There's a good case to be made for doing nothing. Simply expect occasional market downturns and ride them out. It can be hard to do nothing, though, and there are some steps you can take that could help you make the most of a market crash: Do build a cash pile Obviously, if the market crashes, it's a good time to go shopping for bargains.
- A Market Crash Is Inevitable -- Here's What to Do
The stocks tied to lots of wonderful businesses are likely to be depressed -- perhaps significantly so. But if you don't have some ready cash or access to cash to take advantage of that, you could be out of luck. Or you might find yourself selling out of some stocks at depressed prices thus realizing losses or shrunken gains in order to snap up shares of more compelling stocks.
So aim to build a war chest for a future market meltdown by accumulating cash. It's probably best not to overdo it, though, because the market may not crash for another few years, in which time all the cash you've amassed will not have been growing for you in stocks. You might just accumulate enough cash to establish meaningful positions in a few stocks. Do build a watch list It's not enough to have a pile of cash to spend when the market crashes if you end up having no idea what to buy.
So build and maintain a stock watch list. Start by jotting down the names of companies you read or hear about that seem like promising investments. You could do so on paper, but maintaining a list online is better. You can set up an online watch list or "portfolio" full of stocks of interest at sites such as finance.
You might pretend that you bought one or more shares of each at the stock price at which you first noticed the company. That way, the portfolio will always reflect how much the stock has risen or fallen since then. Meanwhile, research and follow the companies on your list and get to know them well.
Wall Street's 'dean of valuation' says digital currencies are replacing gold
Develop a strong understanding of just how they make their money, what their sustainable competitive advantages are, what their competition looks like, what their growth potential looks like, and how financially strong they are, such as in terms of cash and debt. When the market crashes, you'll be familiar with a bunch of companies and will have a sense of which are most compelling, growing most briskly and priced attractively. Monitoring your list regularly can help you notice when a company of interest, but not the overall market, falls in price significantly, presenting a possibly great buying opportunity.
Do consider defensive stocks Another thing you can do if you're anticipating a market crash is to include a bunch of defensive stocks in your portfolio, as they tend to get less punished during a market downturn.
Defensive stocks belong to companies whose fortunes aren't very tied to the economy's movements. For example, people might put off buying refrigerators or cars during a recession, but they'll still buy groceries, socks, soaps, gas, medicine, electricity and diapers.