No. of Recommendations: 19
It's not given a 1.4 multiplier. It's given 1:1 or close. Same with the public equities. Call it column 1.
Certain aspects of business are worth well in excess of their book value. E.g., Sees Candies is booked at something like 50 million but earns double that in EARNINGS per year. It's a billion plus business in value. So it's actual value is several times it's book value. Call it column 2.
As column one has increased in value (pulling the fair ratio down), column two has also increased (pulling the fair ratio up). And the more cash the booked businesses generate (with the cash sometimes falling into column 1), the more the operating companies grow in value in excess of book (column 2).
The aggregate deserves a ratio greater than 1 because of column 2 (& the interaction between the two), not because of column 1.
