Balance Sheet Investing

How to uncover hidden value by focusing on what a company owns.

Following more than three decades of shedding assets to maximize free cash flow, capital expenditures are back on the menu and balance sheets are again growing. A generation of investors finds itself ill-prepared to analyze asset-heavy businesses. Classical methods fail to arrive at reasonable valuations for companies that are themselves active investors.

Building on the work of great balance sheet investors such as Marty Whitman, Michael Price, Peter Cundhill, and Bruce Berkowitz, Let Me Explain…Balance Sheet Investing provides a framework for understanding companies that create corporate wealth through their use and allocation of capital. Where most approaches to value focus on the price paid for future cash flows, balance sheet investing takes a more holistic view of a company’s financial position. The book details the expanded tool set these companies can utilize to create shareholder value.

The book also covers the decline of real capital formation and its recent growth, alongside contemporary examples of balance-sheet-driven value creation. Finally, it places this approach in a portfolio context, providing investors with a practical framework for incorporating asset valuation and asset conversions into their investment process.