FASE 1 IDENTIFICACIÓN PRELIMINAR DE LAS CONCEPCIONES DE LOS ESTUDIANTES SOBRE LA NCM

Nonetheless, they do exist. Individual stocks are often cheap when a whole industry or group of securities has been sold down indiscriminately. In the early 1980s, for instance, the savings and loan industry was depressed, and for good reason. Following the elimination of regulatory ceilings on interest rates, thrifts had been forced to pay higher rates for short-term deposits than they were receiving on long-term loans. Mutual savings banks (owned by their depositors) began to go public to attract more capital, and as they did so, their stocks fetched very low values. United Savings Bank of Tacoma, for one, traded at only 35% of book value. Though many thrifts of the day were weak, Tacoma was profitable and well capitalized. “People didn’t understand them,” says one investor who did. “They had just converted [from mutual ownership], they were small, they were off people’s radar.” Within a year, the investor had quintupled his money.

Another opportunity beckoned in 1997, after the contagious melt- down of Asian stock and currency markets. Once again, the selling was indiscriminate—it tarred good companies and bad alike. Graham and Dodd investors responded opportunistically, booking flights to Hong Kong, Singapore, and Kuala Lumpur. Greg Alexander, who manages money for Ruane Cunniff & Goldfarb, read the annual report of every Asian company he had heard of and determined that South Korea, which previously had discouraged foreign investment and was thus especially short on capital, offered the best bargains. He flew to Seoul and, though still in a jet-lagged stupor, realized he was in a Graham-and-Dodders’ heaven. Cheap stocks were hanging on the market like overripe fruit. Shinyoung Securities, a local brokerage firm that had stocked up on high-yielding South Korean government bonds when interest rates were at a peak, was trading at less than half of book value. Surprisingly, even as late as 2004, Daekyo Corp., an after-school tutoring company, was trading at only $20 a share, even though each share represented $22.66

in cash in addition to a slice of the ongoing business. In Graham and Dodd terms, such stocks promised safety because they were selling for less than their tangible worth. Alexander bought a dozen South Korean stocks; each would rise manyfold within a relatively short time.

The competition for such values is fiercer in the United States, but they can be found, especially, again, when some broader trend punishes an entire sector of the market. In 2001, for instance, energy stocks were cheap (as was the price of oil). Graham and Dodd would not have advised speculating on the price of oil—which is dependent on myriad uncertain factors from OPEC to the growth rate of China’s economy to the weather. But because the industry was depressed, drilling companies were selling for less than the value of their equipment. Ensco International was trading at less than $15 per share, while the replacement value of its rigs was esti- mated at $35. Patterson-UTI Energy owned some 350 rigs worth about $2.8 billion. Yet its stock was trading for only $1 billion. Investors were get- ting the assets at a huge discount. Though the subsequent oil price rise made these stocks home runs, the key point is that the investments weren’t dependent on the oil price. Graham and Dodd investors bought into these stocks with a substantial margin of safety.

A more common sort of asset play involves peering through the cor- porate shell to the various subsidiaries: sometimes, the pieces add up to more than the whole. An interesting case was Xcel Energy in 2002. Xcel owned five subsidiaries, so analyzing the stock required some mathe- matical deconstruction (Graham had a natural affinity for such calcula- tions). Four of the subsidiaries were profitable utilities; the other was an alternative energy supplier that was overloaded with debt and appar- ently headed for bankruptcy. The parent was not responsible for the sub- sidiary’s debt. However, in the aftermath of the Enron collapse, utility holding companies were shunned by investors. “It was a strange time,” recalled a hedge fund manager. “People were selling first and examining second. The market was irrational.”

Xcel’s bonds were trading at 56 cents on the dollar (thus, you could buy a $1,000 obligation of the parent for only $560). And the bonds paid an attractive coupon of 7%. The question was whether Xcel could pay

the interest. The hedge fund investor discovered that Xcel had $1 billion of these bonds outstanding and that the book value of its healthy sub- sidiaries was $4 billion (these are the sort of endlessly useful figures that can be dug out of corporate disclosures). On paper, then, its assets were enough to redeem the bonds with plenty to spare. The hedge fund investor bought every bond he could find.

When no more of the bonds were available, the investor began to look at Xcel’s stock, which was depressed for the same reason as its bonds. The stock wasn’t quite as safe (in a bankruptcy, bondholders get paid off first). Still, the investor’s calculations had convinced him that the parent company would not file for bankruptcy. And the profitable sub- sidiaries were earning $500 million, more than $1 a share. The stock was trading at $7, or less than seven times earnings. So the investor bought the stock too.

The weak subsidiary did file for bankruptcy, but as expected this did not detract from the value of the parent. Within a year, the panic over such utilities subsided, and Wall Street reevaluated Xcel. The bonds went from $56 to $105. The stock also soared. The investor doubled his money on each of his Xcel trades. Neither had been a roll of the dice; rather, each was quantifiably demonstrable as a Graham and Dodd investment. “It was a safe, steady industry,” the investor agreed. “Not a lot of business-cycle risks. I think Ben Graham would have approved.”

As intriguing as Xcel types of puzzles may be, most stocks will simply be valued on their earnings. In reality, the process isn’t “simple.” Valuing equities involves a calculation of what a company should be able to earn each year, going forward, as distinct from taking a snapshot of the assets it has at the moment. Graham and Dodd reluctantly endorsed this exer- cise—“reluctantly” because the future is never as certain as the present.