Brian Gongol Show on WHO Radio - April 27, 2014
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What's wrong with the "conglomerate discount": Or, why Yahoo is too cheapYahoo is selling for less than the sum of its parts, which are pretty easy to tally based upon the values of the shares it owns in other public companies. That's widely regarded as the "conglomerate discount". And it doesn't make any sense at all.
People who have been fooled into believing in "modern portfolio theory" may argue that a basket of options is worth more than an option on a basket". Whatever. The reality is that a conglomerate is like a focused mutual fund, and is worth at least its net asset value. More, if the managers are any good at asset allocation. And they should be, or else they should be fired.
That's really the central role of executive management in any large company -- allocating resources (money, time, and people). If they aren't any good at it, they shouldn't be running the company. If they are, isn't that expertise actually worth a premium, not a discount?
It's silliness like the "conglomerate discount" that should cause us to look at modern finance with some serious suspicion.
Some boundariesIt's not fair to expect kids to construct their own learning...they don't know what they don't know. Heavy-handedness is bad, and freedom to discover is essential, but most people of all ages are overwhelmed if given no path to follow. If we expect people to emerge into adulthood knowing how to manage their finances or how to stay out of trouble and preserve their reputations online, we can't expect them to find it on their own. Curricula in both areas are essential.
- Andy Warhol used an Amiga computer back in 1985 to create some doodles that have been recovered by Carnegie Mellon University. Imagine what other discoveries are lingering out there in discarded floppy disks and dusty hard drives.
- Microsoft just finished the purchase of Nokia's phone business for $7.5 billion, not long after Google sold the Motorola smartphone business to Lenovo for $3 billion. Not an industry in which it would be good to be an investor, but a great environment for consumers -- the more healthy competitors in the business, the better for those of us buying the phones.