Lux Investing
How do you value a stock?
Why do you value in a particular company? What do you ask yourself before investing in a particular company? How do you value it?
Public Comments
- The first questions are: What do they own? What do they owe? What do they do in relation to others in their industry? What are their continued prospects in that industry? If you understand their equity (what stockholder value is), assets (what they have to work with), what their debt picture is (which includes not only the debt but the cash flow picture as well), whether they are doing well over the competition, and if they are expecting to continue to do well, then you have a picture that will make you pleased, or uncomfortable, with a company.
- I really believe that the value of a company and the price of a stock are separate entities. This means that stock prices can move in no relation to how well or bad the company is doing. Let me give you an example, AAPL went from $180 to $120 in about a month. Do you think that the overall operation of Apple changed all that much in a month. But yet, how do you explain that $60 drop if nothing fundamentally changed. That is why when choosing stocks, I always suggest to rely on the stock charts. They will give you the true picture of what the stock is doing. Happy Trading, Jun http://www.tplinvestment.com
