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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.
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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.
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