Investing Feeds

Following on from my previous article on Goodwill it is worth mentioning that Goodwill can be measured in a number of ways, not just as a premium on share price multiplied by issue. There are a number of mathematical ways to model Goodwill and the Investor would be wise to consider some of the alternatives in arriving at a price. Rather than going through them all here I am providing links to a good site which has detailed explanations and worked examples.

http://www.rics.org/Practiceareas/Property/Valuation/iprvaluation.html

This article also deals with two other important intangible assets, Intellectual Property and Human Assets. In the modern market more and more importance is placed on intangible products (Software, Consultancy etc) and the assets list of many of the top companies do not look like they did fifteen years ago. What are Google’s assets? They have a nice building complex in a good location, but compare that or even the cost of their IT systems to the company’s valuation and there is a significant amount of difference. Google has a tremendously valuable brand, and almost beyond value human and intellectual assets.

It is important for the modern investor to understand the value of Intangibles, as intangibles don’t wear out like tangible assets do; they keep on providing value and revenue to a business. Especially in High technology sectors, news relating to any benefits or problems with a company’s Human Assets or Intellectual Property can mean massive changes to stock process. Even rumors of trouble with things like patents, or copyrights and stock prices can take a hit.