Comments on: Saving and Investing: An Introduction to Stock Valuation http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/ personal finance that makes cents Fri, 16 May 2008 03:22:17 +0000 http://wordpress.org/?v=2.5.1 By: John Egan http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-129085 John Egan Wed, 23 Apr 2008 23:10:03 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-129085 Daniel... Your confusion is perfectly understandable.. Aside from the comments above, I'd like to add that the market is a constantly changing animal. It is extremely emotion driven. Couple that with the types of traders in the market (amateurs, institutions, value investors and etc..) and it is very much like driving in San Diego (The variety of driving styles is mind-boggling.. Mexicans from across the border, school kids, guys in $200K Ferraris and 1980 Toyotas with a car-load of kids trying to keep up at 95+ mph, running on one of those 'inflata-spares'... Amazing!) Each type of investor seems to have his day.. And there are whole schools of study on market timing, based on who is in the market right now.. At the moment, the market is extremely 'volatile' .. That is to say, it is prone to big price swings and everyone is on tenter-hooks. So for no apparent reason, you'll see a perfectly good stock tank! (As you noted..) In this market, prices can move up or down, based on many issues: -The company did not quite meet its target. -The company met it's target, but someone felt that they weren't upbeat enough for the future. -Everyone thought they would not meet their target, but they did! So all the people that bet against them had to sell to cover their bets. (Ha! Known as a short squeeze). - The company did great, but those that made a profit decided to take some or all of their profits. - Mutual funds are approaching their quarterly reporting period and have to either get rid of poor performing stocks so they don't have to show the investors that they have them, or are buying good performing stocks that they will dump immediately after reporting ( Called 'window dressing'). - A new hotter stock in the same vein has just opened up, so investors are moving their money to this new investment. ( Happened with Mastercard when Visa opened up and more recently with many of the agricultural chemical stocks when IPI came on the market..) - Etc. etc. etc... The market is like a tug-of-war... It gets pulled back and forth a lot. Thx jegan ;-) Daniel…

Your confusion is perfectly understandable.. Aside from the comments above, I’d like to add that the market is a constantly changing animal. It is extremely emotion driven. Couple that with the types of traders in the market (amateurs, institutions, value investors and etc..) and it is very much like driving in San Diego (The variety of driving styles is mind-boggling.. Mexicans from across the border, school kids, guys in $200K Ferraris and 1980 Toyotas with a car-load of kids trying to keep up at 95+ mph, running on one of those ‘inflata-spares’… Amazing!) Each type of investor seems to have his day.. And there are whole schools of study on market timing, based on who is in the market right now..

At the moment, the market is extremely ‘volatile’ .. That is to say, it is prone to big price swings and everyone is on tenter-hooks. So for no apparent reason, you’ll see a perfectly good stock tank! (As you noted..)

In this market, prices can move up or down, based on many issues:

-The company did not quite meet its target.
-The company met it’s target, but someone felt that they weren’t upbeat enough for the future.
-Everyone thought they would not meet their target, but they did! So all the people that bet against them had to sell to cover their bets. (Ha! Known as a short squeeze).
- The company did great, but those that made a profit decided to take some or all of their profits.
- Mutual funds are approaching their quarterly reporting period and have to either get rid of poor performing stocks so they don’t have to show the investors that they have them, or are buying good performing stocks that they will dump immediately after reporting ( Called ‘window dressing’).
- A new hotter stock in the same vein has just opened up, so investors are moving their money to this new investment. ( Happened with Mastercard when Visa opened up and more recently with many of the agricultural chemical stocks when IPI came on the market..)
- Etc. etc. etc…

The market is like a tug-of-war… It gets pulled back and forth a lot.

Thx jegan ;-)

]]> By: rhbee http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-129081 rhbee Wed, 23 Apr 2008 22:08:52 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-129081 Daniel, It's my understanding (though I am not a trader or expert) that it isn't about the company it's about the value that an investor can see in the stock of that company going up or down. When a company misses its expectation its stock price might go down but that is only a temporary state during which real investors will buy low so they can then sell high. Think about what happened with Bear Stearns. When it went to $2 on a Friday, the stock sold like hotcakes because everyone with market sense or inside info or government connections knew that it couldn't stay at that price. By Monday, investors were profiting $8 less commission. In the real world good news means good news. In the stock market it means that its time to look at a short sale position while you wait for the bounce. The stocks are the business product in this case not the companies that offer them. Daniel,
It’s my understanding (though I am not a trader or expert) that it isn’t about the company it’s about the value that an investor can see in the stock of that company going up or down. When a company misses its expectation its stock price might go down but that is only a temporary state during which real investors will buy low so they can then sell high. Think about what happened with Bear Stearns. When it went to $2 on a Friday, the stock sold like hotcakes because everyone with market sense or inside info or government connections knew that it couldn’t stay at that price. By Monday, investors were profiting $8 less commission.

In the real world good news means good news. In the stock market it means that its time to look at a short sale position while you wait for the bounce.

The stocks are the business product in this case not the companies that offer them.

]]> By: Daniel http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-129030 Daniel Wed, 23 Apr 2008 15:55:25 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-129030 I'm starting to doubt that stocks have any actual value. It all seems to be voodoo. For instance, Rockwell Automation announces that in 2Q 2008 their revenues rose 17% but because their profit margin dropped, their stock price went down($6/share and counting). Now, if I had a small business that grew 17% in three months, I would be thrilled but when a publicly traded company does it, major investors trip over themselves to dump the stock. Maybe I just don't understand the complexities of a global corporation, but the company has increased revenues by $1.5 billion dollars over the past 5 years and increased net profit by almost $1.5 billion, which seems to me like a great performance. So why is their stock seeming like such a stinker lately? Because they grew by 17% when they should have grown by 17.05%(or some such nonsense)? I’m starting to doubt that stocks have any actual value. It all seems to be voodoo. For instance, Rockwell Automation announces that in 2Q 2008 their revenues rose 17% but because their profit margin dropped, their stock price went down($6/share and counting). Now, if I had a small business that grew 17% in three months, I would be thrilled but when a publicly traded company does it, major investors trip over themselves to dump the stock. Maybe I just don’t understand the complexities of a global corporation, but the company has increased revenues by $1.5 billion dollars over the past 5 years and increased net profit by almost $1.5 billion, which seems to me like a great performance. So why is their stock seeming like such a stinker lately? Because they grew by 17% when they should have grown by 17.05%(or some such nonsense)?

]]> By: rhbee http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128648 rhbee Mon, 21 Apr 2008 14:48:57 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128648 I have mentioned it before, JD, serendipity do. Just this morning I was sitting down to post about this very topic. We have a rule in dance teaching. It never hurts to review the basics. That is what good technique is all about. I have mentioned it before, JD, serendipity do.
Just this morning I was sitting down to post about this very topic. We have a rule in dance teaching. It never hurts to review the basics. That is what good technique is all about.

]]> By: John Egan http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128394 John Egan Sat, 19 Apr 2008 00:25:05 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128394 Most of the people on this site seem to be 'buy and hold types'... Personally, I don't believe it for too many reasons, however, if you are the type that really does not want to spend too much time thinking about your holdings and are value inclined, I can heartily suggest "Getting started in Value Investing" by Charles S Mizrahi. His book focuses on the "Warren Buffet" style of investing and he shows you how to find stocks that you should invest in, when to buy them and how to read a quarterly report. (OK.. That sounds boring...But it really isn't that hard.. And P/E ratios are only a very small part of the process.)His approach is really quite simple - you just have to be patient. In essence, he tells you how to properly evaluate a stock and to keep a list of favorite stocks and buy them when they drop in price. Then look at them yearly. Thx jegan ;-) Most of the people on this site seem to be ‘buy and hold types’… Personally, I don’t believe it for too many reasons, however, if you are the type that really does not want to spend too much time thinking about your holdings and are value inclined, I can heartily suggest “Getting started in Value Investing” by Charles S Mizrahi.

His book focuses on the “Warren Buffet” style of investing and he shows you how to find stocks that you should invest in, when to buy them and how to read a quarterly report. (OK.. That sounds boring…But it really isn’t that hard.. And P/E ratios are only a very small part of the process.)His approach is really quite simple - you just have to be patient. In essence, he tells you how to properly evaluate a stock and to keep a list of favorite stocks and buy them when they drop in price. Then look at them yearly.

Thx jegan ;-)

]]> By: AJC @ 7million7years http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128386 AJC @ 7million7years Fri, 18 Apr 2008 21:39:30 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128386 ... if you want to learn how to TRULY value stocks then the absolute best book on the subject, by a country-mile, is Phil Town's outstanding (and very simple to follow) "Rule 1 Investing". AJC. … if you want to learn how to TRULY value stocks then the absolute best book on the subject, by a country-mile, is Phil Town’s outstanding (and very simple to follow) “Rule 1 Investing”. AJC.

]]> By: Writer's Coin http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128272 Writer's Coin Fri, 18 Apr 2008 11:27:06 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128272 At my work we're building a social-networking site that is going to be aimed straight at novice investors and the idea is to do kind of what this is guy is doing in a way that will engage readers. In other words, making it simple but also entertaining. No small task but it's going to be a lot of fun. At my work we’re building a social-networking site that is going to be aimed straight at novice investors and the idea is to do kind of what this is guy is doing in a way that will engage readers. In other words, making it simple but also entertaining. No small task but it’s going to be a lot of fun.

]]> By: Laura H http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128269 Laura H Fri, 18 Apr 2008 10:15:59 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128269 Sigh. I wish that there were transcriptions available for videos like this. Sigh. I wish that there were transcriptions available for videos like this.

]]> By: Warren http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128254 Warren Fri, 18 Apr 2008 05:11:20 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128254 I think this entry is pretty important for twenty somethings to understand. Compound interest works great, but to really capitalize when you're young, you need to be able to have a feel about looking at stocks. I think this entry is pretty important for twenty somethings to understand. Compound interest works great, but to really capitalize when you’re young, you need to be able to have a feel about looking at stocks.

]]> By: Ron@TheWisdomJournal http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128235 Ron@TheWisdomJournal Fri, 18 Apr 2008 02:15:29 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128235 Hey JD, you might re-visit Phil Town's book Rule #1. Hey JD, you might re-visit Phil Town’s book Rule #1.

]]> By: Amy http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128228 Amy Thu, 17 Apr 2008 23:51:39 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128228 If you have the time, consider taking an investment class at the local community college. I am taking one right now towards the CFP designation, and it breaks down many things I've heard but never understood. Of course, you could always just get a textbook and read through, but get the right teacher and it makes it much better! I still don't plan on investing in individual stocks, but it's a great start to understanding the general landscape. If you have the time, consider taking an investment class at the local community college. I am taking one right now towards the CFP designation, and it breaks down many things I’ve heard but never understood.

Of course, you could always just get a textbook and read through, but get the right teacher and it makes it much better!

I still don’t plan on investing in individual stocks, but it’s a great start to understanding the general landscape.

]]> By: J.D. http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128199 J.D. Thu, 17 Apr 2008 20:56:04 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128199 :) I know the videos are kind of dry, but I like them! I love how Michael seems to be concentrating to "dumb down" the material. He obviously knows so much about the topic, that explaining the basics is difficult. It's like when somebody asks me about blogging, and I have to force myself to stick to just the fundamentals. But I know what you mean. While I was writing this up, I was thinking it would be great to have a high-quality animated version of this using a professional narrator and Michael's script. Ah, if only I had the time and ability... :)

I know the videos are kind of dry, but I like them! I love how Michael seems to be concentrating to “dumb down” the material. He obviously knows so much about the topic, that explaining the basics is difficult. It’s like when somebody asks me about blogging, and I have to force myself to stick to just the fundamentals.

But I know what you mean. While I was writing this up, I was thinking it would be great to have a high-quality animated version of this using a professional narrator and Michael’s script.

Ah, if only I had the time and ability…

]]> By: Writer's Coin http://www.getrichslowly.org/blog/2008/04/17/saving-and-investing-an-introduction-to-stock-valuation/#comment-128191 Writer's Coin Thu, 17 Apr 2008 20:28:00 +0000 http://www.getrichslowly.org/blog/?p=1750#comment-128191 Seriously? I think what this guy is trying to do is great. But I can't get through one of those videos. Too boring. How many beginners are going to sit through that? Seriously? I think what this guy is trying to do is great. But I can’t get through one of those videos. Too boring. How many beginners are going to sit through that?

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