At $5.76 is WHC below intrinsic value?

Here is one analyst's analysis on why he continues to buy WHC. SP at time of opinion piece was $6.77.
First his intro piece outlining his thinking. The post below digs into the bowels of WHC itself.
I hold a small parcel of WHC despite the horrific chart. Paid $5.87.
Very long piece, but hope you find it interesting and learn something from it. I certainly did.

Dear Reader,
Howard Marks began writing his ‘memos’ in 1990.Initially, he wrote them as internal communications. They helped him to clarify his thinking on issues.He wrote these memos for 10 years without receiving a single response.Then, on the first business day of 2000, he wrote one titled bubble.com. It was timely and popular with clients, and it encouraged him to write more often.

Now, 24 years later, Marks’ memos are required reading.His latest, Mr. Market Miscalculates, is especially so given what has occurred over the past month.The inspiration for the piece was the early August spike in volatility…and quick return to normal.But it equally applies to what is going on in the Aussie stock market in response to recent earnings announcements.Individual share price reactions to earnings have been all over the place. Rallies followed by sell-offs and vice versa. Mr Market is off his meds again!At times like this, it’s especially important to remember there is a difference between price and value. If you focus only on price, the market will drain you financially and emotionally.Value must be your barometer.

Then, you must be patient enough to wait for the market to realise that value.Unfortunately, you don’t know if or when the market will do that. Sometimes, it’s right, and you’re wrong. It’s just the way it is.I spoke to a value-oriented fund manager friend recently. We chatted about the response to earnings and how the market sold off anything without an ongoing growth story, regardless of price. And companies that did grow just got more expensive, regardless of price.This might feel good for the winners in the short-term. But it’s a risky strategy. That’s why I’m not too concerned about the negative initial reaction to some of our company’s earnings reports.Not much changed fundamentally. They’re just unpopular right now. And unpopular is always a hard place to be in the short-term.This is why I want to show you an excerpt or two of Marks’ Mr Market Miscalculates. It’s really important for value investors to have this framework when considering share price volatility.Marks writes:‘If reality changes so little, why do estimates of value (that’s what security prices are supposed to be) change so much? The answer has a lot to do with changes in mood. As I wrote over 33 years ago, in only my second memo:‘The mood swings of the securities markets resemble the movement of a pendulum. . . . between euphoria and depression, between celebrating positive developments and obsessing over negatives, and thus between overpriced and underpriced.

This oscillation is one of the most dependable features of the investment world, and investor psychology seems to spend much more time at the extremes than it does at a “happy medium.”’Price is an opinion. Which is why it changes from day-to-day. But many investors take it as gospel. We interpret the dollar balance of our portfolio as the ‘truth’.If you find yourself doing this, stop!As Marks says:‘Especially during downdrafts, many investors impute intelligence to the market and look to it to tell them what’s going on and what to do about it. This is one of the biggest mistakes you can make. As Ben Graham pointed out, the day-to-day market isn’t a fundamental analyst; it’s a barometer of investor sentiment. You just can’t take it too seriously. Market participants have limited insight into what’s really happening in terms of fundamentals, and any intelligence that could be behind their buys and sells is obscured by their emotional swings.

My bottom line is that markets don’t assess intrinsic value from day-to-day, and certainly they don’t do a good job during crises. Thus, market price movements don’t say much about fundamentals. Even in the best of times, when investors are driven by fundamentals rather than psychology, markets show what the participants think value is, rather than what value really is. Value is something the market doesn’t know any more about than the average investor. And advice from the average investor obviously can’t help you be an above average investor.Fundamentals — the outlook for an economy, company or asset — don’t change much from day-to-day. As a result, daily price changes are mostly about (a) changes in market psychology and thus (b) changes in who wants to own something or un-own something. These two statements become increasingly valid the more daily prices fluctuate. Big fluctuations show that psychology is changing radically.

You might need to read that a few times to really understand the point. If you do, it will help you emotionally deal with price volatility now and in the future.

With that in mind, let’s look at two of our companies that reported earnings last week. In both cases, the share price reaction suggests emotion and impatience are at play.