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About tbaarr
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I answer only public questions so all can benefit . I do NOT endorse any of the website ads that will bring you to my answers. I have started a blog called ..AS Tbaarr Sees It.. tThats the only site where I might benefit from any ads,see below for the address. I dont care about ratings as i am not here to make you buy a service from me... If you want my opinion just ask me... I was a askme.com expert who was consistantly in the top ten.... I have found my screename,on google,being used without my permission to promote scottrade and other garbage... Ask me here first before you try any service that is claiming my screename or using it as a link.... PLEASE let me know at my webpage or blog.... http://www.geocities.com/tbaarr/night_vision.html.. .. http://www.tbaarr.blogspot.com/ ....So i can go after them Thank you MY BROKER OF CHOICE IS CHARLES SCHWAB

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I retired in 1996 at the old age of 39 by using city based utilities and leap call options. on stocks like ibm and wal mart because you can control these stocks for 2 years for ten cents on the dollar.
As of 1998 I got married and went to work driving Big Rig in 2004 so I could provide my 2 daughters,who are 4 and 8 as of 2007, with QUALITY AFFORDABLE health insurance. THIS job still allows me to trade but will cause you a slightly longer wait for any answer.. I apologize for This but my families welfare comes first..
I am a investor only so i am not here to force anything on you and choose this site because it was free The subjects listed below cover the main reasons i feel justified to call myself an expert the stocks I trade and why my options strategy my use of credit cards how to achieve multiple card accounts some ways to get your first credit card,that i know work how to make approx 120 a year by simply paying your bills with a credit card any questions outside of these topics i will attempt to answer or just say sorry i cant help you
 
   

You are here:  Experts > Money > Online Brokerage/Banking > General Stock Investment Strategies > low book value investing

General Stock Investment Strategies - low book value investing


Expert: tbaarr - 8/30/2008

Question
Hello,

There’s a question that’s been bugging me about stocks trading at less than book value… I can understand why a stock might trade below book value based on supply/demand… company has debt, future earnings are very negative, etc. so the supply is enough and the demand is small enough at the book level price that the price falls below book value.

However, I do have one important question that I cannot seem to find an answer and don’t understand: if there are a lot of stocks trading at less than book value (and there are plenty (even ones trading at less than a tenth of book value), then why doesn’t an arbitrageur come in and takeover buy buying enough shares at less than book value and then liquidate the companies assets for a profit?  Are there some laws that I’m not aware of that prevent people from doing this?

I don’t know much about this type of acquisition but I am thinking this would be done primarily through a hostile takeover (what other ways might this be achieved?).  So, is the answer that a hostile takeover can’t always easily be achieved efficiently and within a reasonable amount of time? – i.e. average volume traded is so small that it would take a long time to accumulate whatever the requisite percent of outstanding shares to be owner (51%?).  


Also, I hope you can answer a second (less important) question that I have along somewhat similar lines: sometimes I’m hanging around stock market forums and some of these shorter term traders seem to be able to be quite good at looking at an earnings release, conference call, maybe news about a new contract for a company, and then be able to use that information to surprisingly accurately predict a short term price movement to a certain price target.  i.e.: a company gets a new contract that will net them 50 million a year in additional profit.  If there are 50 million shares outstanding then the increase in forward EPS is $1 per share.  How then, can that information be appropriately used to judge how much the stock will jump based on this news?  There seems to be some opportunity here because on a news announcement, while some traders are trading momentum, or guessing what the stock price will do, it seems possible to be able to understand what this news means for EPS or another important fundamental/financial factor and turn that into a short term price objective.  

Are there any good books that delve into this subject?



Thank you so much for your time!

Best,
Alan  

Answer
the main reason that the stocks are not bought, Is that the so called book value is a stated value not a real value.

please realize that I DO NOT TRADE ON SPECULATION.

I have researched the stocks I trade for over 10 years.

I have noted trends in movement that are consistant and reoccuring

and I only trade on those trends.

example

at My blog I cover this

http://tbaarr.blogspot.com/2008/08/ibm-will-it-follow-tradition-trend.html

I especially suggest you look at the prior post callled trading quarters.
It deals with the way I short term trade strum ruger symbol rgr

http://tbaarr.blogspot.com/2008/05/playing-quarters-in-stocks.html

as for those short term traders and their insight

I suggest you ask them how they make their calls.

You may find that they have been tracking their stocks for years

and are simply trading on consistant trends

Example I have found a trend that ibm drops from a high in early aug then rises back toward early sept

then by late sept early oct

it drops further

the bottom is usually 15% of the high in early aug

and then by thanksgiving you see a 5-10% recovery

now the actual occurance so far is ibm hit 129 in early aug

it dropped to 122 by the 20th and has gone sideways between 122-125

for the last 10 days

I believe that 126 will be the high by 8 sept and then she will drop to about 111-115. 111 will be about a 15% discount from 129.

this is trend trading

good luck

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