April 15, 2006
Book Value – Follow up & New Company Profile
First off thanks to Darren at ProBlogger for the idea for the follow up post [and a ton of other tips].
I want to revisit my post of a couple days ago about buying signals based on a company's book value. When I posted that one on May 2 VSM.to [the stock that inspired the story] was trading at .46.
This morning while checking my watch list, I noticed it was .67. That's a cool 45% in 2 days. Now is this kind of move typical for value style investing? Sorry, no. Usually value investing requires the pateince to wait for the market to discover that your company is undervalued.
Another reason I wanted to post a follow up was that I just picked up this month's MoneySense magazine and they have a pretty good article about investing based on book value written by Irwin Michael. In it he takes the book value concept one step farther by removing non-cash assets such as goodwill from the equation. He calls the result "tangible book value".
He goes on to present some other interesting reasons for liking LB: recent wise management decisions to focus on LB's core strengths [divest themselves of branches outside of Quebec], and the if there are any mergers or takeovers on the horizon in Canada, LB would be a prime candidate.
After a little digging I came up with a couple of my own reasons to like LB. These include a hip website [hands up anyone who is just waiting for a bank to stop acting like...well...a bank]. And another that I like is the innovative idea of holding a public design competition for the banks interior and exterior makeovers.
Jon, you may ask, what the hell do a cool website and design competitions have to do with investing? Well I have a theory…a spin on the 'buy what you know' theory…but that's a different topic.
In the meantime, I'm going to pick up a few shares of LB for my own portfolio.
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