INVESTMENT STRATEGY
BAILLIE GIFFORD
LIGHT ASSETS
Baillie Gifford’s James Anderson explains why a company’s assets don’t
necessarily provide a realistic indication of its value
$
22.5bn, $28.3bn, and $5.4bn.
These sound large figures. In
most contexts they are large
figures. But for our purposes they
are startlingly small.
They are the fixed assets on the
balance sheets of respectively
Apple, Alphabet (nee Google)
and Facebook. These are three of
America’s largest companies by
market value. Their combined
equity value is around $1.5trn –
or close to thirty fold their fixed
assets. This isn’t just a West Coast
American phenomenon.
China’s Tencent is more
extreme. It has little more than
$1bn in fixed assets but a market
value of $180bn. Office properties
14
are after all both less glamorous
and less expensive in Shenzhen
than in Silicon Valley.
The import of these figures
becomes clearer with context. BP
has $130bn of fixed assets on its
books. From this it wrings out a
market value of $105bn. This is
the labour of over a century.
It would be unduly cruel to
point out the comparative share
price performance of the four
asset-light companies versus BP
or its peers over the last decade.
So let’s just remind ourselves that
ten years ago Facebook was but 18
months old, as yet an invitation
only site and even going public lay
more than 6 years ahead.
There are still many observers
of markets who fondly remember
the days when share prices traded
in a narrow band around the
replacement costs of physical
assets but their plaintive cries
become the ever more distant
echoes of a bygone age.
For much of recorded
his