Getting Into Solid Investment Values

by David Jenyns on April 6, 2009

When we say solid investment values, we have two things in mind: (1) a high degree of market stability and (2) long-range growth potential.

Whenever speculative fever runs high, investors tend to forget such basic investment criteria as asset values, income and capital structure. Asset value is a company’s book value as reflected in the balance sheet. The disparity between book values and market values was, of course, particularly wide in the recent market, where earning, growth or prospects for growth far outweighed the book values of assets.

In addition to selling at a discount from their net asset value, solid investment trust shares afford the investor the benefits of experienced management, diversification of holdings and reasonable hope for long-term capital appreciation.

In its May 1960 Investment Letter, Carreau & Co. tabulated investment trusts to illustrate the disparity between net asset value and market value per share.

Well-selected investment trust shares sometimes are clearly ideal buys for small investors not only as “discounts” from asset values, but also as a “single-package” diversification.

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