Corporate Valuation for Portfolio Investment

Foreword (Dean LeBaron).
 
Preface.
 
Acknowledgments.
 
1 Corporate Valuation for Portfolio Investment: A Philosophical Framework.
 
Valuation Defined.
 
The Importance of Equity.
 
Equity Defined.
 
Articles of Faith Undermined: Securitization at Risk.
 
Benefits of the Equity Marketplace.
 
The Flexible Nature of Equity Capital.
 
Long-Term Superiority of Equity over Debt--with a Caution about Volatility.
 
The Focused Nature of Valuation for Investment.
 
Two Main Sources of Information about Equity.
 
Financial Reports: Issues with GAAP and IFRS/IAS.
 
Sources of Complexity in Accounting for Company Value.
 
Reforming GAAP and IFRS.
 
The Problem of Fair Market Value: Reporting Values for Securities with No Current Market.
 
Three Studies.
 
The Need to Read between the Lines.
 
Human Nature Complicates (but Also Informs) Equity Valuation.
 
George Soros's Concept of Refl exivity.
 
Other Paradoxes in Equity Investing.
 
The Observer Effect.
 
Human Nature as the Key to Equity Value.
 
Need for Expression in Currency Values.
 
On Financial Mathematics.
 
In Closing: About This Book.
 
A Range of Approaches.
 
2 Valuation Based on Assets.
 
Overview of Assets as a Unit of Valuation.
 
An Opening Caveat: The Limitations of Accounting Numbers.
 
Accounting Numbers: Why Assets as a Starting Point?
 
Definition of an Asset.
 
Flow-Dominant vs. Value-Dominant Assets.
 
The Market Premium and Nonmarket Discount.
 
Bear Stearns: A Cautionary Tale.
 
The Asset-Focused Investor.
 
Current Asset Value.
 
Taking Clues from Assets.
 
The Sykes Model.
 
Beyond Assets: Clues from Liabilities and Equity on the Balance Sheet.
 
The Role of the Appraiser and Appraisal Standards in Valuing

Robert A. G. Monks is a pioneering institutional shareholder activist. He founded Institutional Shareholder Services and the LENS Fund, and was chair of the Boston Company. He was a pension administrator in the Department of Labor and was a founding trustee of the Federal Employees Retirement System. Monks is the author or coauthor of a number of books; his most recent are Corpocracy and Corporate Governance, both from Wiley.
 
Alexandra Reed Lajoux is Chief Knowledge Officer at the National Association of Corporate Directors (NACD). She has been an editor for Directors & Boards, Mergers & Acquisitions, and NACD's Director's Monthly. Lajoux is the author or coauthor of several books on mergers and acquisitions and received her PhD from Princeton University.

"Bob Monks new book, Corporate valuation for portfolio investment: analyzing assets, earnings, cash flow, stock price, governance and special situations, is a massive tome, weighing in at more than 550 pages that are really aimed at institutional investors...
The book is eminently readable, exhaustively treating the subject in simple but engaging language, and using practical examples wherever possible. It explains the concepts it uses as it introduces them. It is both ambitious and modest at the same time, covering all aspects of its subject, but disclaiming precision. It admits the hazards of 'determining the present value of future worth' and that, 'despite GAAP and IFRS, financial reports remain only dim mirrors of company value', stressing other factors 'such as qualitative measures of corporate governance.'

Getting to the IR heart, the book claims 'valuation begins from the hour a company's leaders find equity investors who believe so strongly in the company's economic prospects that they are willing to provide capital for it with no strings attached. This belief in a company's future - this hope - is what makes the value of the stock something more than the current value of its assets if valued in a fire sale.'

Of course the book does, at length, consider the different ways to assess the qualitative aspects of a company's value, but it also expands on that 'hope' that, ultimately, is the added value of good investor relations beyond sending out the spreadsheets. It is in that qualitative space where an effective IRO can tease out and illustrate the factors that are not susceptible to number crunching.

Although the book is officially aimed at fund managers, the authors do express the hope that others will find it interesting and of value. And they should. Its combination of penetrating insights that are sharply expressed and carefully built-up reasoning make it not only an amazingly readable work on one of the drier branches of the dismal science of