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Creating a Portfolio Like Warren Buffett: A High-Return Investment Strategy by Jeeva Ramaswamy

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CHAPTER 13

Stock Research Checklist—Assets

Trying to identify companies that have hidden assets that are overlooked by Wall Street is beneficial because those stocks trade cheaper, meaning you can get more reward by investing in them.

Does the Company Have Any Hidden Assets That Have Been Overlooked by Wall Street?

For example, look at natural resource companies that specialize in resources such as gold. During 2009 and 2010, gold prices soared. The reason for the price hike was Federal Reserve quantitative easing, which increased demand from China and India and caused a lack in supply. Because of the gold price increase, gold mining stocks soared.

Sometimes, Wall Street does not recognize the value of those reserves and it misprices the securities. For those situations, you need to use the opportunity to buy the securities at discount prices. When commodity prices are in a downturn, people think that prices are going to stay the same. So, tired of waiting, they sell their stocks at the lowest prices. When the commodity prices start to recover, whoever bought the shares at the lowest prices is going to earn a high return on their investment.

Established brand names are another form of hidden assets Take Coca-Cola (KO), for example. When you are looking at the Coca-Cola balance sheet you do not see the dollar figure for Coke’s brand name. But, think about the value of Coke’s brand name, which has been around for more than 100 years and is the result of many pricey marketing campaigns. ...

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