Valuation….It ALWAYS Matters in Illiquid Investments

Yesterday I blogged about the terms overvalued and undervalued being the two most abused words in stocks analysis. If a stock has liquidity, the terms mean nothing to me. I have the investing scars to prove it.

When it comes to illiquid and private investments, valuation should be one of your top concerns…always. I have the investment scars from private investments to prove that one as well (see all my posts on )You can’t sell your investment the next day so you can’t get caught up in the euphoria like we do in the stock market.

Today I was reading about the good people at WordPress turning down $200 million …ballsy. BUT, they (Matt) can do that as they have raised a paltry amount at a good valuation for all parties.

I don’t plan on changing the world like young Matt, but if you do or if you make angel investments or invest in private companies, make sure you focus on valuations.

One comment

  1. Thomas says:

    True. I just got lucky back in 1999 and my CHF 200 (that’s swissies) investment bought me 4000 worth of a nice vacation in Mauritius – with an utterly overvalued stock (the company went bust just a year later). Point is that in a liquid market, you get rid of things everyone wants to buy (I think you made that point once, Howard). I think valuation is just what a stock ought to be worth, regardless of what the market says. And I also firmly believe that in the long run, the market remembers what a company is worth. I am just looking at UBS over here now. It’s cheap. Veeeery cheap for one of the world’s biggest private banks. And just because it had to write off some fancy paper money thingies that I do not even try to understand does not make it junk. Just shows that bankers do not have a clue either… So on the whole, I think it is my time to buy now even in a liquid market. Then again, I happen to be an amateur with few scars.

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