The Position Makers

i’ve been in the process of looking into why the market cap of a company like VMW would equal that of EMC, when emc owns 86% of vmw. the best explanation i can get is that the market (at large) values the 14% float of VMW at $94 per share. the valuations would be quite different were the other 80%+ to be floated.

more importantly, during my search i found an interesting tool for gaging the market valuation (discounted cash flow or DCF) of a company.

after plugging in EMC & VMW, i found that emc is trading just below it’s DCF and vmw is way, way above it.

i won’t make any market move suggestions since i’m still in the intial probe on this. i’ll keep everyone updated on what i find but i thought this tool was too good to pass up.

disclaimer on tool from site:

“The Inputs:

Garbage in, Garbage out! Like any other computer program, if the inputs into our Online Valuation Service are garbage, the resulting valuation also will be garbage. The scope of estimating and calculating all the data for 5000 + stocks can result in some weird valuations, so be patient. If a figure comes up for a certain input that is either highly implausible or looks wrong, indeed it may be. If a valuation is way out of line, figure out where the Service may have strayed on a valuation, and correct it. Ours is a daunting task. The Baseline Valuation is meant to be a starting point for further, more careful analysis. The DCF valuation procedure does not work well for certain sectors, notably REITs, and some financial companies.”