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. Divestiture

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

    A takeover-defense tactic that involves the sale of the target ...
  3. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  4. Conglomerate

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

    1. The actual value of a company or an asset based on an underlying ...
  6. Undervalued

    A financial security or other type of investment that is selling ...
Related Articles
  1. Warren Buffett: How He Does It
    Active Trading

    Warren Buffett: How He Does It

  2. Conglomerates: Cash Cows Or Corporate ...
    Investing Basics

    Conglomerates: Cash Cows Or Corporate ...

  3. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

    Using The Price-To-Book Ratio To Evaluate ...

  4. How Warren Buffett made Berkshire Hathaway ...
    Stock Analysis

    How Warren Buffett made Berkshire Hathaway ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center