Pulling Rabbits Out of Hats in the Oil Business - and Elsewhere

4 Pages Posted: 15 Feb 2018

See all articles by Robert Ferguson

Robert Ferguson

AnswersToGo

Phillip Popkin

Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF)

Date Written: February 4, 1982

Abstract

The prices recently offered for Conoco and Marathon Oil clearly astounded many market observers. Where did these figures - 10, 20, 30 per cent over prevailing market values - come from? Had the managements of Dome Petroleum, Mobil, Du Pont et al. deserted their calculators for magic wands? Were they pulling the numbers out of their hats?

Are companies acting irrationally when they pay seemingly excessive prices to acquire other companies? Not necessarily. When tax deductions such as depreciation can be increased, it is sometimes possible to gain at the government's expense. Perhaps this is what has been happening in the oil industry.

Keywords: stock valuation, security analysis, accounting standards, stock selection, portfolio selection

JEL Classification: G00, G10, G11, G12, G14

Suggested Citation

Ferguson, Robert and Popkin, Phillip, Pulling Rabbits Out of Hats in the Oil Business - and Elsewhere (February 4, 1982). Financial Analysts Journal, Vol. 38, No. 2, 1982. Available at SSRN: https://ssrn.com/abstract=3117921

Robert Ferguson (Contact Author)

AnswersToGo ( email )

6815 Edgewater Drve
Apt 208
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United States
7868974573 (Phone)

Phillip Popkin

Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF) ( email )

730 Third Avenue
New York, NY 10017-3206
United States

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