Book Summary: Analyzing companyies & Valuing Share

Hello Partner,

in the past two month I have found a great book to read. (I think i always use great book in every books i read, lol). This book very detail about how to assure company not only the company performance but also how the management run the company. The book is called Analyzing Companies and Valuing Share by Michael Cahill you can see the illustrate below:

The things that I really like from this book is how the books elaborate the company in easy ways. like what to ask while valuing company. At the first chapter I learn about why we should look at the sector first. because it gives image to investor a quick sense of how difficult or otherwise it is for a company to make money. We can ask to our self what is the characteristics of the sector? what attributes does a company need to succeed in such an envinronment? because, overcoming the difficult economics of an industry can be done, but it needs a special company with special characteristic to achieve this and it is quite rare.

Characteristic of the sector mentioned in the books are:

First, overcapacity, where demand does grown up, but there is too much capacity (and/ or too many competitors) chasing the higher volumes. This leads to pressure on prices and will prevent a profit recovery to compete with other competitors and some company who already in the sectors cannot exit because they already spent to much to stay in the sector and create barriers to exit. 

Second, highly capital intensive in this sector even tough the company have a lot of competitors but they all can't decrease the price of the product because the competitor and company have highly intensive capital employed. This kind of sector weak pricing will lead to poor returns on that capital.

and the rest is what kind of product the company made it's commodity product or not (of course Buffett did'nt like commodity product who has not competitive advantage) or product that made really hard to competitors to entry the industry. And finally, is the company have no pricing power. it shows that the consumer have a bargain power or not.

If you want to learn the basic of valuing company i thinks this is one of great book to read. because it's focus on what we should look to assure the company is going well. Of course i can't write it all in this page. 

Thank you for reading,

Best regards,

Zharfan Dhaifullah