Great article. I view sum of parts as similar to potential energy - water behind a dam. Absent change, the potential can be inert indefinitely. If undervaluation doesn't convert into earnings growth or meaningful capital return, there is no next buyer of the shares - it will go up if/when SOTP guys get interested, then right back down again when they all try to sell.
Great article. I view sum of parts as similar to potential energy - water behind a dam. Absent change, the potential can be inert indefinitely. If undervaluation doesn't convert into earnings growth or meaningful capital return, there is no next buyer of the shares - it will go up if/when SOTP guys get interested, then right back down again when they all try to sell.
That's a great analogy. CNNE is an interesting one in that context - it's kind of a paper case, but one good thing is that management after Q3 basically said "this valuation is dumb, we're not likely to spend our cash on anything but our own shares, because we're not getting better returns elsewhere."
Of course, they have to stick to that, and one big concern is that they're not necessarily incentivized to do so.
Great article. I view sum of parts as similar to potential energy - water behind a dam. Absent change, the potential can be inert indefinitely. If undervaluation doesn't convert into earnings growth or meaningful capital return, there is no next buyer of the shares - it will go up if/when SOTP guys get interested, then right back down again when they all try to sell.
That's a great analogy. CNNE is an interesting one in that context - it's kind of a paper case, but one good thing is that management after Q3 basically said "this valuation is dumb, we're not likely to spend our cash on anything but our own shares, because we're not getting better returns elsewhere."
Of course, they have to stick to that, and one big concern is that they're not necessarily incentivized to do so.