Thursday, July 16, 2015

Seeking Alpha: Melrose A Tough-To-Value 'Buy And Hope' Story

I'll concede from the get-go that valuation is never an easy or foolproof exercise; the best an investor can hope to do is make some reasonable assumptions and estimates and respond appropriately as new data come in. There are cases, though, where the valuation difficulty level is well above average, and I believe Melrose (OTC:MLSPF, MRO.L) is one such example.

Management here has a well-established "buy, improve, sell" model, but investors really have no choice but to make some very broad estimates (or guesses, really) with respect to what future acquisition activity will look like. In my mind, that makes this more of a "buy-and-hope" type of stock. I don't mean that to denigrate management in any way, nor cast aspirations on its ability to generate value by identifying underperforming assets that it can acquire and improve. What I do mean, though, is that this value creation exercise is integral to the value of these shares, and without a firm sense of what Melrose will buy, there is a great deal of uncertainty in the valuation today.

Read the full article here:
Melrose A Tough-To-Value 'Buy And Hope' Story

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