#1 INVESTING RULE - BOOK VALUE INCREASE = RETURNS

What do I do? Full-time independent stock market analyst and researcher:

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Today I discuss something boring, something old fashioned but something that works. It is up to you if you want to follow the current investing trends or you want to follow what works in the long term. The change in book value +- dividends is the only correct measure of intrinsic value and Buffett has been focusing on it for the past 70 years.

[fidelibuslucrum]

I watch and subscribe to many YouTube channels and I rate yours as one of the best out there because you're not afraid to tell your viewers unpopular truths. GE is a great example of what's coming down the pipeline for most listed stocks. GE has destroyed their shareholders value (today's Enron) a stock that was priced at $60 back in 2000 now can't catch a bid at $19 (today's book value of $8.67 down from $11.82 in 2012) and that's on the backdrop of all time high stock markets. People are saying that this time it's different, they are correct but for the wrong reasons. The only thing that is different is the magnitude of this outlier market valuations. Passive investing is fashionable today but so was flared trousers back in the 1960s.

[nicolascappella]

In argentina we have a really difficult problem with book value. We have high inflation and an accountant policy that makes difficult to use the book value. The asset are recorded at its historical acquisition price (not adjusted by inflation) while the debt usually in USD and its recorded at its current price (due to fx fluctuation) so the BV is usually very low in Argentina. Therefore we have to calculate our own book value or use another ways to calculate the value added to the shareholders

[petah]

Sven, I appreciate your video and encouragement in looking at capital appreciating companies which offer upside and hence increases in book value. I've always told my colleagues to separate price and intrinsic value. You have listeners, I'm subscribing and wholly appreciate your ideas on China too.

While indexing is bringing up the general market (and possibly newer investors), let's see its downside effect and stay with our winners long-term. Buffet, Graham, Munger, Monash P.... you have a good talk track!

PS: I didn't finish watching this video to write this comment and I was so happy to see you bringing up BRK performance! Not trendy, not cool... let's make money!

[Oritsu]

Very Good Advice. True Financial Knowledge.

[benjamindorge]

I'm glad I found this video! Sven, if you were to compare growth in retained earnings to the growth in the S&P 500, do you think that could be used in the $1 Test model for retained earnings? I feel like most videos describing the $1 Test model incorrectly use the market value of the stock, which could be all over the place instead of substituting in the general market.

[jdp]

Try and look at good companies like Home Depot or Lowe's or OReilly Automotive, just to name a few, and look at their Book Value sink. They are all good companies too.

[legitimatead]

Dear Sven, here's a question related to AAPL's balance sheet strength. As the link below will show, AAPL has $130.16 billion in long-term marketable securities. If a recession hits those securities, isn't that going to majorly injure AAPL's balance sheet and thus stock price? All the best! D.

[hl]

How ab negative book growth company line APPLE? Please do a video as comparison of possible ! Thanks.

[wouterrobers]

Hey sven, old video, but I'd like to know...
Isn't it easy for companies to boost the book value with intangibles like patents, brand value, movie rights and other IP? Or just overstate the value of inventory?

[LITTLE-ROCK]

Hi. Are you saying we should buy when price of stock is below book value, or are you suggesting looking for the right pbv ratio?

[TheMpamMpam]

I guess you where right regarding GE...

[stamatarsenikos]

sven can you make a video showing us how to make this wonderful graph ourselves???

[xBroTVx]

The problem about looking at book value like this is, that you would favour companies which buy assets on debt, while disliking companies which repay debt.

[garrisonsimon]

Facebook Apple Amazon Netflix Nvidia Google for the long term!! What does Papa Sven think??? FANG FOR THE LONG TERM! You will get many views when you make this video!

My retirement account consists of AMZN, AAPL, GOOGL, majority BRK-B
Keeping my eye on HMY and EGO. I'm speculating gold will go lower before it goes higher.

[BrentInvesting]

Great Video, I recently bought a stock with a P/B of .98 where it was at 12$ a Share, I picked some up at 11.96 and it's up to 13$ right now in 2-3 days ~8% Gain. It's one of my rules I try and follow, but I still pick up some stocks with higher then 3 P/B such as MSFT just because I know future wise they are set.
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[ivolgafly]

As long as the CEO or the controlling shareholders dont steal the book value. Book value is nice if you CONTROL a company. Rare for most investors.

[calm_candle_wick]

Sven, im agreeing with you but there was an interview where Warren Buffett commented that book value is not as important as earnings. Care to make a video to debate against that please? it would help me a lot as ive now become confused

[kevin]

Sven, What do you think about IBM? I can see they are in AI, Blockchain, Cloud. Company looks to have change its structure for a more flexible one. Despite I see a good P/E of 12.42, but Price/Book is 7.05. Actually has fall 30%, and when there is clisis this stock use to fall around 35%. So I can say the deep (risk) is not too deep as ths is down now. However the Price/Book is 7.05 make me think it twice. I like the stock but this point does not like me.

[stamatarsenikos]

the book value of bershire in 1965 was around 20 and in 2015 it was below 20. The book value has been almost flat. If book value growth is your own growth shouldn't the book value be increasing every year and be an increasing linear line??

[voiceinwilderness]

Sven, I assume that by book value you means Total Assets less Total Debt = NAV or Book Value.   However, how do you account for the situation where new equity is issued? In this case the Total Assets increase but Total Debt stays the same, which drives up NAV or Book Value. HOWEVER this is now divided across an increased number of investors or shares.   How is this new equity issuance stripped out from the number?