PRIVATE MARKET VALUE

"The basic concept of value to a private owner and being motivated when you're buying and selling securities by reference to intrinsic value instead of price momentum - I don't think that will ever be outdated." Charlie Munger

“We try to appraise every company in a way that reflects its private market value in a sale today” Chris Mittleman

“If the price of the stock is well below what an intelligent owner would pay for the whole business, the odds are strong that something good will happen with the stock” Wally Weitz

“The underlying principle is to arrive at what someone would pay in an arms-length transaction to buy the business” Andrew Jones

“Value investing is a large-scale arbitrage between security prices and underlying business value” Seth Klarman

"There is a long term arbitrage that takes place because of the disparities between market prices and control values." Marty Whitman

“Generals - A category of generally undervalued stocks, determined primarily by quantitative standards, but with considerable attention also paid to the qualitative factor. There is often little or nothing to indicate immediate market improvement. The issues lack glamour or market sponsorship. Their main qualification is a bargain price, that is, an overall valuation on the enterprise substantially below what careful analysis indicates its value to a private owner to be” Warren Buffett [on the 3 investment categories of the partnership].

“We want to understand what a strategic buyer in the industry would pay for the assets and why” Clyde McGregor

“We try to determine what a knowledgeable buyer expecting a reasonable return would be willing to pay today, in cash, for the entire business. Our approach requires us to understand the business – its strengths and weaknesses – rather than just the numbers. As investors have learned, the numbers can’t always be trusted.” Jean Marie-Eveillard

“One of the approaches I take is to look for a stock in the public market that is selling at a significant discount to private market value where I can identify catalysts for potential change” Leon Cooperman

“Look at the prices paid in corporate mergers and acquisitions to find stocks that are selling at a significant discount to what they are actually worth to a knowledgeable buyer” Christopher Browne

“How do sophisticated private-market buyers themselves evaluate businesses for possible purchase? In general, they make projections of free cash flow and then calculate the present value of those cash flows, evaluating the impact of differing assumptions on valuation. In other words they perform present value analysis.” Seth Klarman

“The big difference between private acquisitions and public equities is a negotiated transaction versus the non-negotiated transaction. When I buy stocks in the public markets, I am dealing with unintelligent sellers for the most part, or sometimes sellers that are very influenced by psychology on market nuances” Mohnish Pabrai

"Investors must remember – although at the peak of emotion they sometimes forget – that securities are fractional interests in, or claims on, businesses that have their own assets and cash flows. They have (usually) ongoing business value and (at least hypothetically) a liquidation value. The herd can irrationally lose sight of the underlying assets or long-term prospects of a business when it focuses on price movements triggered by disappointing quarterly results of the latest overheated social networking IPO." Seth Klarman

“We focus on what private market values are, particularly if there is an opportunity to realize those values through either a financial or strategic transaction” Kevin Dreyer

"In the core part of our business, we try to approach valuation as if we were buying the whole company. If we were buying the whole company, would we be satisfied with the absolute return that we could take out in the form of dividends and free cash flow" Chuck Royce

"There are two prices to stocks: the one using the stock market and the one you would get in a private market transaction. You still want a 30% discount from that intrinsic valuation." Thomas Schrager

"I‘d say a theme that runs throughout a lot of our portfolio holdings is the concept of public market value versus private market value. About 95% of publicly traded companies have two values. One is the auction market value, which is the price you and I would pay for one hundred shares of a company. The other is the so-called private market value, which is the price a strategic or financial investor would pay for the entire business. So one of the approaches I take is to look for a stock in the public market that is selling at a significant discount to private market value where I can identify catalysts for a potential change. " Leon Cooperman

"I saw an opportunity in the public markets to close what I saw as a gap between the price at which public companies were trading and what I felt their ultimate private market values were worth. So not knowing anything about how a hedge fund works, I set up a hedge fund." Barry Rosenstein

"The benefit of being a public investor is that you can typically acquire equity at a significant discount to its intrinsic private market value (rather than a buyout premium), employ no leverage (rather than 4x or often greater debt/EBITDA in an LBO), and still have an element of constructive influence on the company." Russell Glass

"The disadvantages of owning marketable securities are some times offset by a huge advantage: Occasionally the stock market offers us the chance to buy non-controlling pieces of extraordinary businesses at truly ridiculous prices - dramatically below those commanded in negotiated transactions that transfer control." Warren Buffett

"Growth in corporate intrinsic value is often obfuscated by stock price movement, which does not appropriately track the accretion in business value. That’s good for all of us who are appraisers of businesses, because it means you get more mispricing and better opportunity to get a franchise at a cheap price." Mason Hawkins

"The whole notion of private market value with a catalyst was not that much different than the way that I had looked at companies as an M&A banker." Kevin Dreyer

'We focus on what private market values are, particularly if there is an opportunity to realize those values through either a financial or strategic transaction." Kevin Dreyer

"In an auction driven market you are likely to see more mispricing than in a private kind of negotiated transaction environment" Mohnish Pabrai

“What you do is identify a company in the public markets that is selling below a channel called ‘intrinsic private market value.  We define Private Market Value (PMV) as the value an informed industrialist would pay to purchase assets with similar characteristics. We measure PMV by scrutinizing on- and off-balance sheet assets and liabilities and free cash flow. As a reference check, we examine valuations and transactions in the public domain. Our investment objective is to achieve an annual return of 10% above inflation for our clients.  That gives you a margin of safety, and help protect the downside by providing a cushion, because it is selling at a significant discount to “private market value.”   Mario Gabelli

"In step three, he [Shelby Davis] made a rough guess at the private market value of any apparent opportunity.  In other words, what would the company be worth if a larger company decided to acquire it"  The Davis Dynasty

"We view valuation in light of what a reasonable business person might pay - not too dissimilar to what private equity, leveraged buyout, or control investors do" Marty Whitman

"Our valuation is always based on acquisition or going-private values, which are generally two different numbers because a strategic buyer is typically able to pay a higher price"  Gregg Powers

"In a sense, value investing is a large-scale arbitrage between security prices and underlying business value" Seth Klarman

"We approach valuation as a private owner would, meaning we determine what we would be willing to pay for the expected cash flow stream from the business.  If the share price is at a sufficient discount to that value, we're interested"  Robert Kleinschmidt

"When we buy a stock, we always think in terms of buying the whole enterprise because it enables us to think as businessmen rather than stock speculators"   Warren Buffett

“We are evaluating all alternatives in order to buy our equity at current prices to arbitrage the differential between its current multiple and the private market value. These buybacks provide a useful benchmark in evaluating other capital allocation options, including acquisitions” John Malone

"We're focussed on valuing the business rather than just the stock.  Underlying that is our estimate of private market value, which is what an informed, rational investor would pay for the entire company"  John Rogers

"In essence, the [my] fund invested in companies that, as a result of detailed fundamental analysis, were trading below their "intrinsic value"".  The intrinsic value was defined as the price that a private investor would be prepared to pay for the security if it were not listed on a public stock exchange" Peter Cundill

"A private market value model allows us to disaggregate business segments and uncover hidden value..  Try to invest in companies you'd be happy to buy lock, stock and barrel at their current price "  Ralph Wanger

"It is the goal to invest in good businesses that also represent strategic value to a corporate buyer (at a substantial discount to what that buyer would pay)" Jeffrey Ubben

"At all times I strive to buy stock at prices per share that no acquirer could ever pay for the whole company - not because the prices are too high, but because the prices are so low that a potential acquirer proposing them would be laughed out of the boardroom.  Such is the opportunity afforded by the very human market for common stocks."  Michael Burry

"The key driver has always been to look at buying businesses that are straight forward within my circle of competence, and those that we can get well below what we think they're worth to a private buyer" Mohnish Pabrai

"In reality, there is a high degree of correlation between public market and private values because of the opportunities for arbitrage if there are large disparities between the two" Bill Ackman

"While studying real life comparable acquisition multiples helps inform our view of a company’s intrinsic value, we do not blindly extrapolate observed deal multiples. Sometimes we believe buyers overpay, particularly when acquisitions can be financed with low cost debt. To that end, in addition to requiring that a company be inexpensive relative to where comparable companies have been acquired in real life acquisitions, we also require that the company be cheap on an absolute basis. This additional test is more of an absolute, common sense approach to valuation using tried and true multiples that are linked to real return math. For example, we would not pay 15X EBITA for a company even if deal comparables indicated that buyers had been willing to pay 23X EBITA for similar businesses. While the valuation appears relatively attractive, we cannot develop confidence that these high multiples are sustainable." Tweedy Browne & Co