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Valuing Prem Watsa's Portfolio - Tangible Book Value
7/3/2012 6:45:00 PM
Tangible Book Value was a concept important to Ben Graham,
often considered the founder of value investing. Because it helps
investors identify cheap stocks, GuruFocus has included it on the
, which automatically finds important data about the stocks in
each gurus' portfolio.
Tangible book value is one metric to consider when deciding whether to buy a stock. Here is Bill Ackman commenting on Watsa's holding Citigroup ( C ), showing how he considers tangible book value in a broader context:
Citi remains extremely cheap relative to our estimate of intrinsic value - it trades at less than 60% of tangible book value, about six times last year's underlying earnings per share and about four times normalized earnings per share after giving credit to its net tax assets and excess capital.
The intrinsic value of Citi has increased meaningfully over the course of our ownership of the bank while the stock price has declined substantially. We believe that the continued generation of profits and increase in growth of tangible book value will ultimately cause investors to revalue the bank at prices approaching its intrinsic value.
See more valuations of Watsa's stocks here .
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