robertlane Posted February 21, 2006 Share Posted February 21, 2006 http://money.cnn.com/magazines/fortune/mos...shots/1445.html Quote Link to comment Share on other sites More sharing options...
retro-man Posted February 21, 2006 Share Posted February 21, 2006 "With an arsenal of popular cars and a lean cost structure, Toyota has long dwarfed rival auto manufacturers in terms of market capitalization. By this yardstick it is now worth more than double the combined value of DaimlerChrysler AG, General Motors Corp. and Ford Motor Co." That turbine-like whine you hear in the background is Richard spooling up his "Toyota is doomed by arrogance" response. Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 21, 2006 Share Posted February 21, 2006 "With an arsenal of popular cars and a lean cost structure, Toyota has long dwarfed rival auto manufacturers in terms of market capitalization. By this yardstick it is now worth more than double the combined value of DaimlerChrysler AG, General Motors Corp. and Ford Motor Co." That turbine-like whine you hear in the background is Richard spooling up his "Toyota is doomed by arrogance" response. Maket capitalization is the dumbest way of measuring a company. Quote Link to comment Share on other sites More sharing options...
retro-man Posted February 22, 2006 Share Posted February 22, 2006 Maket capitalization is the dumbest way of measuring a company. For the sake of the Econ. 101 - challenged (me), please elaborate. Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 For the sake of the Econ. 101 - challenged (me), please elaborate. Ok if all shares of yoda were to go up for sale at the same time what would happen to the selling price, would it go up, down, or stay the same? Quote Link to comment Share on other sites More sharing options...
retro-man Posted February 22, 2006 Share Posted February 22, 2006 Ok if all shares of yoda were to go up for sale at the same time what would happen to the selling price, would it go up, down, or stay the same? I see. What is a better way of evaluating a company? Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 I see. What is a better way of evaluating a company? Not sure but maket cap sure isnt a good way. This problem is like not knowing how to prove something but being sure of how to disprove something. Maybe a longer term solution. I know a persons total net worth is more valueable as a measure of that individual then thier annual income. That way you smooth out those nasty habit years. Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 is that it. Please tell me why maket cap impresses you so much? Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 22, 2006 Share Posted February 22, 2006 (edited) I see. What is a better way of evaluating a company? Toyota is doomed by arrogance, but not in some immediate Enron-esque free-fall. Rather we may see a generation or so of eclipse, where their offerings by and large tend to miss the mark (think Sony, GM, or Mercedes-Benz). Eventually this may require painful restructuring, but until then, Toyota's market cap will stagnate. I don't see it collapsing. As far as "evaluating" a company, market cap is pretty useless. You only make money from the company provided you can find a bigger fool willing to pay a higher price for your stock. Dividends create more real wealth than market cap does (for long term investors). If you are a short term investor, market cap is key, if you're long term, dividend yield. However, in the long run, market cap means less than shareholder equity. In fact, market cap, if it exceeds shareholder equity by many multiples of annual earnings, is a warning flag that the company should be avoided--unless you want to be caught standing up when the music stops. Also, companies should be evaluated by how they treat all their stakeholders. Ford is a far more responsible employer, and while it may be argued that Ford is a worse company to do business with (for dealers and suppliers) than Toyota, I am not going out on a limb by stating that shareholder activism and pressure from other activists (and the unions) have forced both GM and Ford to adopt global labor standards that are far more concrete, enforceable, and in touch with reality than Toyota's marshmallowy warblings on employee rights. ... Edited February 22, 2006 by RichardJensen Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 Toyota is doomed by arrogance, but not in some immediate Enron-esque free-fall. Rather we may see a generation or so of eclipse, where their offerings by and large tend to miss the mark (think Sony, GM, or Mercedes-Benz). Eventually this may require painful restructuring, but until then, Toyota's market cap will stagnate. I don't see it collapsing. As far as "evaluating" a company, market cap is pretty useless. You only make money from the company provided you can find a bigger fool willing to pay a higher price for your stock. Dividends create more real wealth than market cap does (for long term investors). If you are a short term investor, market cap is key, if you're long term, dividend yield. However, in the long run, market cap means less than shareholder equity. In fact, market cap, if it exceeds shareholder equity by many multiples of annual earnings, is a warning flag that the company should be avoided--unless you want to be caught standing up when the music stops. Also, companies should be evaluated by how they treat all their stakeholders. Ford is a far more responsible employer, and while it may be argued that Ford is a worse company to do business with (for dealers and suppliers) than Toyota, I am not going out on a limb by stating that shareholder activism and pressure from other activists (and the unions) have forced both GM and Ford to adopt global labor standards that are far more concrete, enforceable, and in touch with reality than Toyota's marshmallowy warblings on employee rights. ... I agree with what you say Richard except I want to make it clear that I never meant to portray Yoda as "Enron-esque". I just simply wanted to point out how over priced it was. Quote Link to comment Share on other sites More sharing options...
marc-o Posted February 22, 2006 Share Posted February 22, 2006 Not sure but maket cap sure isnt a good way. This problem is like not knowing how to prove something but being sure of how to disprove something. Maybe a longer term solution. I know a persons total net worth is more valueable as a measure of that individual then thier annual income. That way you smooth out those nasty habit years. Market Cap is a great way of evaluating a company. Not the only way, but definitely provides good indication as to its strength: stock price is based on the perceived value that is attached to each share of a company, so the sum of these adds up to a pretty good estimate of what the company could be worth. That said, bubbles can create in the stock market, but that doesn't mean Toyota stock is a bubble - the auto sector is very well covered by analysts and there is plenty of historical data available (unlike the dot-com boom a few years ago). Also, the market isn't reliant on a commodity prices like other potential bubbles (energy stocks). Of course it's impossible to proove there is a bubble in a stock price, until it pops... Plenty of people smarter than me use market cap as a means of measuring companies, that alone is fairly convincing. However I still can't think of any clearly better way of measuring a company's strength - revenue or net income are sometimes used, which also have pros and cons, like any measure. That turbine-like whine you hear in the background is Richard spooling up his "Toyota is doomed by arrogance" response. that's got me laughing, out loud, hard. Love that "turbine-like whine" :P Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 22, 2006 Share Posted February 22, 2006 (edited) but definitely provides good indication as to its strength: Meh. Good indication as to perceived strength. If you believe idiots don't buy stock or over accumulate near the peak of a bull market--- My opinion: market cap is like looking at your tongue. It can look good when you're healthy, it can look good when you're sick. You got to look at a lot more than market cap, but I'm sure I'm singing to the choir on that one. ... Edited February 22, 2006 by RichardJensen Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 Market Cap is a great way of evaluating a company. Not the only way, but definitely provides good indication as to its strength: stock price is based on the perceived value that is attached to each share of a company, so the sum of these adds up to a pretty good estimate of what the company could be worth. That said, bubbles can create in the stock market, but that doesn't mean Toyota stock is a bubble - the auto sector is very well covered by analysts and there is plenty of historical data available (unlike the dot-com boom a few years ago). Also, the market isn't reliant on a commodity prices like other potential bubbles (energy stocks). Of course it's impossible to proove there is a bubble in a stock price, until it pops... Plenty of people smarter than me use market cap as a means of measuring companies, that alone is fairly convincing. However I still can't think of any clearly better way of measuring a company's strength - revenue or net income are sometimes used, which also have pros and cons, like any measure. that's got me laughing, out loud, hard. Love that "turbine-like whine" :P Have you and would you recommend buying Yoda stock at its current price? Quote Link to comment Share on other sites More sharing options...
Bluecon Posted February 22, 2006 Share Posted February 22, 2006 The market cap is a reflection of the company. Toyota makes far more profit than the big 3 combined and it is this profit that provides Toyota the ability to constantly grow and improve the product and manufacturing process. Just one example is the new simple slim aluminum casting process. Toyota quite seamlessly implements the process resulting in a large cost savings. Ford has a brand new aluminum foundry in Cleveland that is mothballed due to Fords' inability to bring the plant into production capability. Another example is the cancellation of the Hurricane engine due to lack of funds. Meanwhile Toyota has a new aluminum block DOHC 5.7l V8. Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 22, 2006 Share Posted February 22, 2006 The market cap is a reflection of the company. Toyota makes far more profit than the big 3 combined and it is this profit that provides Toyota the ability to constantly grow and improve the product and manufacturing process. Just one example is the new simple slim aluminum casting process. Toyota quite seamlessly implements the process resulting in a large cost savings. Ford has a brand new aluminum foundry in Cleveland that is mothballed due to Fords' inability to bring the plant into production capability. Another example is the cancellation of the Hurricane engine due to lack of funds. Meanwhile Toyota has a new aluminum block DOHC 5.7l V8. Market cap is a bad reflection of the companies position because when a company is over priced it reflects only the over exaggerated perception of that company. Yoda is not worth $106 per share and if you pay that much for it you are a complete idiot. Ford at $8 is a much better buy because all it needs is one good hit (like 300) to shoot up to the $30 range and Ford has alot in the pipe line. http://www.blueovalnews.com/index.php?cate...2_articleid=173 Quote Link to comment Share on other sites More sharing options...
Bluecon Posted February 23, 2006 Share Posted February 23, 2006 Market cap is a bad reflection of the companies position because when a company is over priced it reflects only the over exaggerated perception of that company. Yoda is not worth $106 per share and if you pay that much for it you are a complete idiot. Ford at $8 is a much better buy because all it needs is one good hit (like 300) to shoot up to the $30 range and Ford has alot in the pipe line.http://www.blueovalnews.com/index.php?cate...2_articleid=173 What is a better buy, Toyota at $106 or Ford at $8? The market price is directly reflected in what investors think the company is worth. Look at Toyota, they systematically keep producing new product and improving their production efficientcy. Ford stumbles along. This is why Ford is at $6 and Toyota is at $106. What will be the price in 6 months or one year? Ford up and Toyota down? I doubt that. Quote Link to comment Share on other sites More sharing options...
rkisler Posted February 23, 2006 Share Posted February 23, 2006 What is a better buy, Toyota at $106 or Ford at $8? The market price is directly reflected in what investors think the company is worth. Look at Toyota, they systematically keep producing new product and improving their production efficientcy. Ford stumbles along. This is why Ford is at $6 and Toyota is at $106. What will be the price in 6 months or one year? Ford up and Toyota down? I doubt that. Well, that's not the point in making money on these stocks. What's most important is relative performance; i.e. it's the slope of the curve. If, due to current thinking that Toyota is on top of the heap and perfect and Ford is a bag of s&*(, then Ford could be the better bet. Of course, a Ford bet would be riskier. It is true that total market capitalization represents what the investors in total think the company is worth. Comparing share prices like Toyota at $106 and Ford at around $8 is not relevant. Theoretically, market cap takes into consideration perfect knowledge on the part of the investor of the company's present value including future cash flows. Here are a few market capitalization figures for companies we are familiar with: Fiat $11 billion GM $12 billion Harley Davidson $14 billion Ford $15 billion Nissan $54 billion Honda $55 billion Daimler-Chrysler $57 billion Toyota $193 billion But investors don't have perfect knowledge, and individual investors and institutional investors are often lulled into projecting the future with today's results. In the case of the autos, they can be swayed by the barage of reporters who fill space with repetitive stories. If you know something about the industry, then that's the opportunity to make money. I have bought auto stocks from time to time, and I am proud to say I have always made money. I have held Honda stock for over 23 years, and Toyota for 12. But, despite my affinity for Ford products, I haven't owned any Ford stock for over 20 years. Until today. I sold 50% of my Toyota stock and bought Ford. Although Ford certainly has a lot of issues to overcome, I think there is a significant amount of upside opportunity from today's beat down position. It's very simple. I'm betting that the percentage increase in Ford stock over, say, the next 5 years will be higher than Toyota. Quote Link to comment Share on other sites More sharing options...
marc-o Posted February 23, 2006 Share Posted February 23, 2006 Have you and would you recommend buying Yoda stock at its current price? I'm not recommending anything, I'm just saying that assuming stock is fairly (or closely) to being fairly valued, is an accurate representation of the total overall value of a company. Of course in finance parlance, that's not a "buy" - a stock to buy is one that is clearly UNDERvalued. Sure stocks are to an extent priced based on what the expectations are for the company... but depending on the strength of the trend behind them, it can be a self-fulfilling prophecy. My opinion: market cap is like looking at your tongue. It can look good when you're healthy, it can look good when you're sick. You got to look at a lot more than market cap, but I'm sure I'm singing to the choir on that one. ... yes you are Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 23, 2006 Share Posted February 23, 2006 I'm not recommending anything, I'm just saying that assuming stock is fairly (or closely) to being fairly valued, is an accurate representation of the total overall value of a company. Of course in finance parlance, that's not a "buy" - a stock to buy is one that is clearly UNDERvalued. Sure stocks are to an extent priced based on what the expectations are for the company... but depending on the strength of the trend behind them, it can be a self-fulfilling prophecy. yes you are WOW if you can not see that Yoda is over priced then fine please buy it. I could not imagine better punishment for being such a moron. :shrug: Quote Link to comment Share on other sites More sharing options...
DRODMOTORS Posted February 24, 2006 Share Posted February 24, 2006 Ok if all shares of yoda were to go up for sale at the same time what would happen to the selling price, would it go up, down, or stay the same? I see. What is a better way of evaluating a company? Agreed. Market cap is like your home's value. Say your house is valued at $800K. Your neighbors at $780K, another at $820...etc, so basically your neighborhood has homes in the $800 area. What's a bank going to appraise your home at? Now if all the homes went on the market at once that's a different story, but then that's a crash....and then we're all fucked. :happy feet: Quote Link to comment Share on other sites More sharing options...
foxrun Posted February 24, 2006 Share Posted February 24, 2006 Agreed. Market cap is like your home's value. Say your house is valued at $800K. Your neighbors at $780K, another at $820...etc, so basically your neighborhood has homes in the $800 area. What's a bank going to appraise your home at? Now if all the homes went on the market at once that's a different story, but then that's a crash....and then we're all fucked. :happy feet: See the point is not that Yoda woud sell all at once, or even that it could, just that it does not have access to all that "wealth"(the total sum or market capitalization) and if it ever tried to, even a portion of it, it would trigger a sell off and a price reduction. If anything market cap is like an imaginary future price that can never fullfill itself because any newer price is payed for by irrational ideals once that price has passed certain levels. Quote Link to comment Share on other sites More sharing options...
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