{"id":1322,"date":"2024-03-06T11:03:19","date_gmt":"2024-03-06T11:03:19","guid":{"rendered":"https:\/\/spakur.is\/ad-lesa-a-milli-linanna-vid-mat-a-virdi-fyrirtaekja\/"},"modified":"2024-05-07T10:41:06","modified_gmt":"2024-05-07T10:41:06","slug":"reading-between-the-lines-in-company-valuation","status":"publish","type":"post","link":"https:\/\/spakur.is\/en\/reading-between-the-lines-in-company-valuation\/","title":{"rendered":"Reading between the lines in company valuation"},"content":{"rendered":"

[et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”4.16″ custom_padding=”2px|||||” global_colors_info=”{}”][et_pb_row column_structure=”1_2,1_2″ admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”1_2″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Text” _builder_version=”4.24.2″ text_text_color=”#000000″ text_font_size=”16px” text_letter_spacing=”1px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”]<\/p>\n

\u201cIt\u2019s stated here in black and white\u201d is sometimes the turn of phrase when referring to hard facts. It was long assumed that if something was in print then it must be accurate. The same goes when it comes to evaluating companies. The most rational way to evaluate a company is to look up its annual accounts and look at the hard facts. True \u2013 annual accounts are indeed seldom mistaken. As a matter of law, they are verified and signed by an auditor. On the other hand, just going through the published number is a very narrow way of evaluating the future worth of a company and can be done quite quickly and cheaply using machine learning or artificial intelligence. Indeed, the only proper way of valuating a company is to read between the lines to assess the hidden inner value of the operation. This especially applies to intangible assets. They include trademarks, patents, goodwill, licenses of various kinds, human capital, and reputation, to name a few. These assets are often hidden behind the numbers and must be analyzed subjectively, each in its turn. For it is precisely here, in this valuation, where the wheat is separated from the chaff in long term investments in the stock market.<\/p>\n

Listed companies have an extensive obligation to provide information. Today, quite detailed financial information is available to the public regarding each listed company. On the internet, there are also websites like Yahoo Finance, Bloomberg, CNBC, and Keldan in Iceland, where this financial information is analysed. Furthermore, one can also find their various coverage of the companies and their management. Thus, there is no shortage of figures on screens. However, the more information that is available, the more complicated it is to make investment decisions based thereon. This problem will only become exacerbated with the arrival of artificial intelligence and various algorithms. The fact is, simply, that when the investor is faced with having to select an asset for their portfolio, they have many comparable companies to choose from. The danger, obviously, is that the bird\u2019s eye view over the forest will become lost in the multitude of trees.<\/p>\n

But how to valuate intangible assets? How can one predict the popularity of a product or service? How can one predict which companies will become an industrial leader? – Indeed, who could have predicted the growth of Lululemon Athletica, Decker\u2019s Outdoor, and Shopify, to name a few up-and-coming companies?<\/p>\n

The simplest way to valuate intangible assets is to deduct their book value from their market value. This method is, however, not very reliable and is not easily transferable between different industries. Worse, this method reflects the assessment of the market which is reflected in the share price. Therefore, it is based on chasing the market. Each investor must make her own independent assessment when picking stocks, if they are to have any hope of beating the market.<\/p>\n

In order to reach that goal, one needs to read between the lines in the annual accounts of companies and assess the future value, considering the competitive advantage which the intangible assets of the company generate.<\/p>\n

Intangible competitive advantages are not a new phenomenon. Companies like Microsoft, Apple, and Coca Cola all enjoy such an advantage. Microsoft\u2019s advantage, considering its size and technological monopoly which traps customers because all others use the same tech and, therefore, the cost of changing service providers is enormous. Apple also has an edge because of herd mentality and brand strength, and Coca Cola because of the often-mentioned industrial secret. This advantage yields more customer loyalty and the ability to set prices high without people taking their business elsewhere.<\/p>\n

One good example is the shoe brand Hoka, which has garnered a fine reputation within the running community. Hoka came into being in the French Alps in 2009. The aim was to enhance the comfort and safety of those who run in the mountains without sacrificing speed. Comfort with a thick sole and bright colours are the hallmarks of Hoka. Deckers Outdoor acquired Hoka in the year 2013, and today Hoka comprises 39% of Deckers Outdoor sales. Admittedly, Hoka shoes are good, but the best feature of Hoka is its strong reputation, built on the basis of quality and performance. The strong reputation of a brand not only yields increased sales but also provides a competitive edge and is therefore to be defined as an intangible asset of the company, to be assessed as part of its value.<\/p>\n

The best way to assess the value of intangible assets is familiarity with the industry to which the company belongs and extensive knowledge of its operational environment. However, the old adage holds true that the devil is in the details. Today\u2019s production processes are complex, but each company has in some form or the other a comparative advantage that have not only ensured survival but profit and growth in their respective sector. This advantage as to be understood and analyzed in order to pick a winner in each fray.<\/p>\n

Also, it\u2019s important to trust one\u2019s intuition regarding various human factors which determine the success of companies, such as the vigour of the executive committee and so on. Intuition is a thing to be acquired from experience, whether from success or failure, in selecting companies. The bottom line may be that the key to stock picking may be an understanding of the rising trends and fads guiding the purchasing behaviour behind the figures. In that respect, people will always be more successful than computers.<\/p>\n

The author is an investor and the owner and fund manager of Spakur Invest. Spakur Invest invests in valuable, resilient, international companies which the fund intends to own for a long time.<\/p>\n

[\/et_pb_text][\/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_image src=”https:\/\/spakur.is\/wp-content\/uploads\/2024\/03\/marathon2.png” title_text=”marathon2″ _builder_version=”4.24.2″ _module_preset=”default” custom_margin=”||15px|||” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”]Memories made in motion: Celebrating our Reykjav\u00edk Marathon finish with my two biggest supporters by my side.<\/em>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cIt\u2019s stated here in black and white\u201d is sometimes the turn of phrase when referring to hard facts. It was long assumed that if something was in print then it must be accurate. The same goes when it comes to evaluating companies. The most rational way to evaluate a company is to look up its […]<\/p>\n","protected":false},"author":1,"featured_media":1226,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"on","_et_pb_old_content":"\"\"\u201e\u00dea\u00f0 stendur h\u00e9r svart \u00e1 hv\u00edtu\u201c er stundum haft \u00e1 or\u00f0i \u00feegar sanna \u00fearf a\u00f0 eitthva\u00f0 s\u00e9 r\u00e9tt. \u00dea\u00f0 var l\u00f6ngum \u00e1liti\u00f0 a\u00f0 ef eitthva\u00f0 v\u00e6ri prenta\u00f0 \u00fe\u00e1 hlyti \u00fea\u00f0 a\u00f0 vera r\u00e9tt. Sama \u00e1 vi\u00f0 \u00feegar kemur a\u00f0 ver\u00f0mati fyrirt\u00e6kja. E\u00f0lilegast er a\u00f0 glugga \u00ed \u00e1rsreikninga fyrirt\u00e6kja \u00feegar kemur a\u00f0 \u00fev\u00ed meta vir\u00f0i \u00feeirra. J\u00fa \u2013 og vitaskuld eru \u00e1rsreikningar sjaldnast rangir. \u00deeir eru l\u00f6gum samkv\u00e6mt yfirfarnir og undirrita\u00f0ir af endursko\u00f0anda. Hins vegar eru \u00e1rsreikningar samt sem \u00e1\u00f0ur a\u00f0eins \u201et\u00f6lur \u00e1 bla\u00f0i\u201c og \u00fea\u00f0 er eil\u00edti\u00f0 erfitt a\u00f0 meta raunverulegt vir\u00f0i vi\u00f0komandi f\u00e9lags \u00e1n \u00feess a\u00f0 lesa \u00e1 milli l\u00ednanna til \u00feess a\u00f0 meta hi\u00f0 dulda innra vir\u00f0i rekstursins. \u00deetta \u00e1 s\u00e9rstaklega vi\u00f0 \u00feegar kemur a\u00f0 \u00f3efnislegum eignum. H\u00e9r m\u00e6tti nefna v\u00f6rumerki, einkaleyfi, vi\u00f0skiptavild, leyfi \u00fdmis konar, mannau\u00f0, j\u00e1kv\u00e6\u00f0a \u00edmynd svo eitthva\u00f0 s\u00e9 nefnt. \u00deessar eignir liggja gjarnan a\u00f0 baki t\u00f6lunum og \u00fearf a\u00f0 greina s\u00e9rstaklega. \u00dea\u00f0 er einmitt h\u00e9r, \u00ed \u00feessu mati, sem skilur \u00e1 milli feigs og \u00f3feigs \u00ed \u00fev\u00ed a\u00f0 fj\u00e1rfesta til lengri t\u00edma \u00e1 hlutabr\u00e9famarka\u00f0i.\r\n\r\nUppl\u00fdsingaskylda skr\u00e1\u00f0ra fyrirt\u00e6kja er mj\u00f6g r\u00edk. \u00cd dag liggja fyrir nokku\u00f0 n\u00e1kv\u00e6mar opinberar fj\u00e1rhagsuppl\u00fdsingar um hvert einasta skr\u00e1\u00f0 fyrirt\u00e6ki sem allir hafa a\u00f0gang a\u00f0. \u00c1 netinu er einnig a\u00f0 finna s\u00ed\u00f0ur eins og Yahoo Finance, Bloomberg, CNBC og Kelduna \u00e1 \u00cdslandi \u00fear sem \u00feessar fj\u00e1rhagsuppl\u00fdsingar eru greindar. \u00dear er einnig h\u00e6gt a\u00f0 finna umfj\u00f6llun um f\u00e9l\u00f6gin og stj\u00f3rnendur \u00feeirra. \u00dea\u00f0 er \u00fev\u00ed enginn skortur \u00e1 t\u00f6lum \u00e1 skj\u00e1m. En \u00feeim mun meira af uppl\u00fdsingum sem liggja fyrir, \u00fev\u00ed fl\u00f3knara er a\u00f0 taka fj\u00e1rfestinga\u00e1kvar\u00f0anir \u00e1 grundvelli \u00feeirra. \u00deessi vandi \u00e1 a\u00f0eins eftir a\u00f0 aukast me\u00f0 tilkomu gervigreindar og me\u00f0 reikniritum \u00fdmis konar. Sta\u00f0an er einfaldlega s\u00fa a\u00f0 \u00feegar fj\u00e1rfestir stendur frammi fyrir \u00fev\u00ed a\u00f0 velja eign inn \u00ed eignarsafni\u00f0 sitt hefur hann \u00far gr\u00ed\u00f0arlegum fj\u00f6lda samb\u00e6rilegra fyrirt\u00e6kja a\u00f0 velja. H\u00e6ttan er vitaskuld s\u00fa a\u00f0 yfirs\u00fdnin yfir sk\u00f3ginn hverfi fyrir allt of m\u00f6rgum trj\u00e1m.\r\n\r\nEn hvernig \u00e1 a\u00f0 meta \u00f3efnislegar eignir? Hvernig er h\u00e6gt a\u00f0 sj\u00e1 fyrir um vins\u00e6ldir v\u00f6ru e\u00f0a \u00fej\u00f3nustu? Hvernig er h\u00e6gt a\u00f0 sj\u00e1 fyrir hva\u00f0a fyrirt\u00e6ki ver\u00f0i lei\u00f0andi \u00ed sinni grein (e. Industrial leader). J\u00fa \u2013 hvernig hef\u00f0i veri\u00f0 h\u00e6gt a\u00f0 sj\u00e1 fyrir v\u00f6xt Lululemon Athletica, Deckers Outdoor og Shopify svo nokkur n\u00fdleg sp\u00fatn\u00edk fyrirt\u00e6ki s\u00e9u nefnd?\r\n\r\nEinfaldasta lei\u00f0in til \u00feess a\u00f0 meta \u00f3efnislegar eignir er a\u00f0 draga b\u00f3kf\u00e6rt vir\u00f0i fr\u00e1 marka\u00f0svir\u00f0i. \u00deessi a\u00f0fer\u00f0 er \u00fe\u00f3 ekki mj\u00f6g \u00e1rei\u00f0anleg og fer\u00f0ast illa \u00e1 milli \u00f3l\u00edkra atvinnugreina. \u00dea\u00f0 sem er \u00fe\u00f3 verra er a\u00f0 \u00feessi a\u00f0fer\u00f0 endurspeglar mat marka\u00f0arins \u00e1 \u00f3efnislegum eignum f\u00e9lagsins. H\u00fan byggir \u00e1 \u00fev\u00ed a\u00f0 elta marka\u00f0inn. Hver fj\u00e1rfestir hl\u00fdtur a\u00f0 \u00feurfa a\u00f0 leggja sitt eigi\u00f0 mat \u00e1 m\u00e1li\u00f0 ef honum \u00e1 a\u00f0 heppnast a\u00f0 n\u00e1 betri \u00e1v\u00f6xtun en \u00feekkist \u00e1 marka\u00f0i. Til \u00feess a\u00f0 n\u00e1 \u00fev\u00ed marki \u00fearf a\u00f0 lesa \u00e1 milli l\u00ednanna \u00ed \u00e1rsreikningum fyrirt\u00e6kja og meta framt\u00ed\u00f0arvir\u00f0i\u00f0 \u00ed lj\u00f3si \u00feess samkeppnisforskots sem \u00f3efnislegar eignir fyrirt\u00e6kisins mynda.\r\n\r\n\u00d3efnisleg samkeppnisforskot eru ekki n\u00fd a\u00f0 n\u00e1linni. Fyrirt\u00e6ki eins og Microsoft, Apple og Coca Cola b\u00faa \u00f6ll yfir sl\u00edku forskoti. Microsoft \u00ed lj\u00f3si st\u00e6r\u00f0ar og t\u00e6knilegrar einokunar sem heldur vi\u00f0skiptavinum f\u00f6ngnum vegna \u00feess a\u00f0 allir a\u00f0rir nota s\u00f6mu t\u00e6kni og \u00fev\u00ed fylgir gr\u00ed\u00f0arlegur kostna\u00f0ur a\u00f0 skipta um \u00fej\u00f3nustu. Apple hefur einnig yfirbur\u00f0i \u00ed lj\u00f3si hjar\u00f0heg\u00f0unar og v\u00f6rmerkjastyrks og Coca Cola \u00ed lj\u00f3si hins margumtala\u00f0an i\u00f0na\u00f0arleyndarm\u00e1ls. \u00deetta forskot gefur \u00feessum fyrirt\u00e6kjunum meiri trygg\u00f0 vi\u00f0skiptavina og getu til \u00feess a\u00f0 setja upp h\u00e1tt ver\u00f0 \u00e1n \u00feess a\u00f0 f\u00f3lk leiti anna\u00f0.\r\n\r\nEitt gott d\u00e6mi er sk\u00f3v\u00f6rumerki\u00f0 Hoka sem hefur geti\u00f0 s\u00e9r gott or\u00f0spor innan hlaupaheimsins. Hoka h\u00f3f feril sinn \u00ed fr\u00f6nsku \u00f6lpunum \u00e1ri\u00f0 2009. Markmi\u00f0i\u00f0 var a\u00f0 auka \u00fe\u00e6gindi og \u00f6ryggi \u00feeirra sem stunda fjallahlaup \u00e1n \u00feess a\u00f0 f\u00f3rna hra\u00f0a. \u00de\u00e6gindi me\u00f0 \u00feykkum s\u00f3la og litagle\u00f0i einkenna Hoka. Deckers Outdoor keypti Hoka \u00e1ri\u00f0 2013 og samastendur \u00ed dag a\u00f0 39% af s\u00f6lu Deckers Outdoor. Hoka eru g\u00f3\u00f0ir sk\u00f3r, \u00fev\u00ed er ekki h\u00e6gt a\u00f0 neita en fyrst og fremst st\u00e1tar Hoka af sterku or\u00f0spori sem er byggt \u00e1 grunni g\u00e6\u00f0a og frammist\u00f6\u00f0u. Gott or\u00f0spor v\u00f6rumerkis eykur ekki a\u00f0eins s\u00f6lu heldur virkar einnig sem samkeppnisforskot og flokkast \u00fev\u00ed sem \u00f3efnisleg eign f\u00e9lagsins sem meta \u00e1 inn \u00ed vir\u00f0i \u00feess.\r\n\r\nEin besta lei\u00f0in til \u00feess a\u00f0 greina vir\u00f0i \u00f3efnislegra eigna er a\u00f0 hafa \u00feekkingu \u00e1 \u00feeim geira sem f\u00e9lagi\u00f0 starfar innan e\u00f0a dj\u00fapa \u00feekkingu \u00e1 rekstrarumhverfi. \u00dear heldur hi\u00f0 fornkve\u00f0na a\u00f0 p\u00fakinn felur sig \u00ed sm\u00e1atri\u00f0unum. \u00cd annan sta\u00f0 er mikilv\u00e6gt a\u00f0 treysta eigin inns\u00e6i \u00e1 \u00fdmsum mannlegum \u00fe\u00e1ttum sem r\u00e1\u00f0a \u00e1rangri fyrirt\u00e6kja, l\u00edkt og dug framkv\u00e6mdastj\u00f3rnar, samskipti vi\u00f0 vi\u00f0skiptavini og svo framvegis. Inns\u00e6i er eitthva\u00f0 sem l\u00e6rist me\u00f0 reynslunni, af b\u00e6\u00f0i \u00e1rangri og mist\u00f6kum vi\u00f0 a\u00f0 velja f\u00e9l\u00f6g til \u00feess a\u00f0 kaupa. Kannski er lykilatri\u00f0i\u00f0 \u00fea\u00f0 a\u00f0 skilja mannlegt e\u00f0li e\u00f0a \u00fe\u00e1 kaupheg\u00f0un sem liggur a\u00f0 baki t\u00f6lunum. \u00cd \u00fev\u00ed efni munu manneskjur alltaf standa sig betur en t\u00f6lvur.\r\n\r\nH\u00f6fundur er fj\u00e1rfestir, eigandi og sj\u00f3\u00f0stj\u00f3ri Spaks Invest. Spakur Invest fj\u00e1rfestir \u00ed ver\u00f0m\u00e6tum, \u00ferautseigum al\u00fej\u00f3\u00f0legum fyrirt\u00e6kjum sem sj\u00f3\u00f0urinn hyggst eiga til langs t\u00edma.","_et_gb_content_width":"","footnotes":""},"categories":[17],"tags":[],"class_list":["post-1322","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-articles-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/posts\/1322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/comments?post=1322"}],"version-history":[{"count":10,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/posts\/1322\/revisions"}],"predecessor-version":[{"id":1420,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/posts\/1322\/revisions\/1420"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/media\/1226"}],"wp:attachment":[{"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/media?parent=1322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/categories?post=1322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/spakur.is\/en\/wp-json\/wp\/v2\/tags?post=1322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}