"Stocks do well or poorly in the future because the business behind them do well or poorly-nothing more, nothing less." (Book - The Intelligent Investor) Above quote made me easier to understand stocks. We have to consider about the business behind the stock. Will it run for years? Will it make profits? Will it have to face alternatives/competitors? Will it go for R&D and make new products/new inventions? Has it a good management/leaders? Price to book value (PBV)? Price to Earnings ratio(PE)? Feel free to add your experiences and thoughts.....
Stocks with bad earnings can rise and stocks with good earnings can tank. That is the reality of it. The problem is when you accept a theory and believe it as fact without actuallly, verifying it? Have you heard of technical analysis or the use of stockcharts alone to decide how to trade that stock? If a stock is going up, is the reason even important? What about if the stock you were sure 100% that is going to skyrocket, instead, drops like a rock? You do not know the strength and weakness of any given stock but, hedge funds with their army of research analysts and their actual conversations with other CEOs or even the CEO of that very company would know way ahead of time and take positions where it would benefit them. For you, you are out of luck unless, you use the stockcharts to base your trading decisions on. Take note, stockcharts contain all the trading information and market participants trading records. You will not find any data as pure as that to make sound trading decisions. It shows you the price points where there is a lot of selling and price points where there is a lot of buying. Is that useful information? You better believe it.
Its all about perception..... P/B,P/E,P/FCF holds little predictive value in this "iteration" of the market... Gun to my head,I would go with Oneil over Graham and have very loose fundamental filters...
Consider this quote by Mark Cuban in the Forward to the book "The Number" "Stocks don’t go up because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about fundamentals? Fundamentals is a word invented by sellers to find buyers. Price/earnings ratios, price/sales, the present value of future cash flows, pick one. Fundamentals are merely metrics created to help stockbrokers sell stocks, and to give the buyers reassurance when buying stocks. Even the way profits are calculated is manipulated to give confidence to buyers."
%% MOSTLY right; + more to it that than fundamentals are used by seller to sell + funds to buy + sell. LOL ....................................................................................................... EASILY proved /mostly / teck stocks / tech ETFs/qqq will out gain SPY most every day of the week....................................................................................
The market is made up of.... 1. Investors 2. Traders 3. Speculators 4. Manipulators 5. Snake oil sellers 6. Shortists 7. Management... folks who want to get out before shit hits the fan. 8. Last but not least... teachers. Folks want to teach those bad guys a lesson e.g. GME. With each of these groups in the market, it's hard to predict the price.
You dont have to predict any price, but you have to pick the valued business/right business. The Right Buisness eventually reach its potential values with the time.