Saturday, January 07, 2006

Looking for hidden value

I was going through the annual report of "Kirloskar Brothers". All seemed fine when I arrived at the investments page of the company (Pg 36). The quoted investments in the balance sheet was 828,266,840 rupees. I peered through the schedules for further details. Under it's quited investments were a number of companies, one of them being "Kirloskar Oil Engines Ltd." - a rather well perfomring company. So Kirloskar brothers have 7,390,327 shares of this company which is listed in the books at 404,980,851 (i.e. 54.79 rupees per share). The current price of the same shares is 203.3 (7th Jan 2006). So the investments of Kirloskar Brothers Ltd. are atleast 1,502,453,479 rupees. (given their stake in Kirloskar Oil Engines). Add to this the remaining investments they hold.

There are numerous ways of finding value but the best to read the balance sheets of companies. Some companies have crazy amounts of land (SBI, CBI will qualify for this), some have investments (Sundaram Clayton in TVS Motors). Not just assets - I would look at patents in the same way, or an unstoppable franchise. Warren Buffett looked at Disney in the same way - "although Mickey Mouse and Snow-white may be written off in the Disney books, they are stil powerful franchise". Mattel Toy's Barbie would fall in the same league. Nearer to home, "CeaseFire" and "AquaGuard" have this distinction.


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