Thread by @quansimodo

Taking a look at share prices, and a few numbers struck me. It's an interesting yet overlooked concept known as the conglomerate discount.

I'm going to use four stocks as example. First set, Uacn and cap plc.

UAC. N8.50
Cap N30.

UAC plc is the parent company of Chemical and Allied products plc. Yet CAP plc traded at nearly 4 times higher.

The reason behind this is a simple concept called the conglomerate discount ?

The congolmerate discount simply means a parent company or conglomerate will trade at a lower price than its units.

On face value, one would expect Uacn to trade much higher. Markets however tend to price conglomerates lower.

Why ? It's simply much more efficient to manage one company than a group.

You also tend to have laggards and losers within the group. So cap has performed quite well. While updc the real estate arm of UAC has done poorly.

Another example of congolmerate discount.

Transcorp plc. 1.28.
Transcorp hotel 6.

Transcorp plc is the parent company. Transcorp hotel however trades at nearly 5 times higher.

So sometimes as an investor, cheap doesn't always mean better.

Investing logic can often be a bit twisted. Always untie and ask questions.