Conglomerate Discount

AAA

DEFINITION of 'Conglomerate Discount'

A reference to the tendency of the stock market to undervalue the stocks of conglomerate businesses. Conglomerate discount is calculated by adding an estimation of the intrinsic value of each of the subsidiary companies in a conglomerate and subtracting the conglomerate's market capitalization from that value.

INVESTOPEDIA EXPLAINS 'Conglomerate Discount'

The conglomerate discount arises from the sum-of-parts valuation, and it is the reason why many conglomerates spinoff or divest subsidiary holdings.

Investors often point to the conglomerate discount as a market inefficiency and view the discount as a way to buy undervalued stocks.

RELATED TERMS
  1. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Divestiture

    The disposal of a business unit through sale, exchange, closure, ...
  3. Sale Of Crown Jewels

    A takeover-defense tactic that involves the sale of the target ...
  4. Undervalued

    A financial security or other type of investment that is selling ...
  5. Conglomerate

    A corporation that is made up of a number of different, seemingly ...
  6. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Active Trading

    Warren Buffett: How He Does It

    We look at the Sage of Omaha's methodology for evaluating value stocks.
  2. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  3. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  4. Trading Strategies

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  5. Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  6. Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  7. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  8. Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...
  9. Chart Advisor

    This ETF Will Deliver Upside With Downside Protection

    With markets near all-time highs as naysayers warn of a coming correction, how can you stick around for more gains and still limit downside risk? The answer could be industrials.
  10. Investing News

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center