The 3 Different Types Of Value

An interesting take on the three different types of value – Market, Intrinsic and Private.

Intrinsic value, or underlying business value is what’s commonly known as the company’s “worth”, market value is determined by the share price (multiplied by the number of shares), and private value is that which an investor or acquiring company may be persuaded to pay.

Many value investors look to the prices paid in mergers and acquisitions of similar companies to determine the potential private value of a company.  When a company trades at a wide discount to that value it can provide an investment opportunity….  Investors are subject to tendencies and biases like groupthink, herd behaviour and basing investment decisions on recent performance.  Intrinsic value and private value tend to be less influenced by human emotions.

“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…” Read the three page article here.