[DesertCat]

[ QUOTE ]
[ QUOTE ]

From a trading perspective, TA is superior to FA. FA can take years to "work" while TA can be scaled to minute by minute gyrations. From an investing perspective, FA is superior to TA. FA provides a higher degree of reliability while TA is a coin toss or relatively trivial.

[/ QUOTE ]

I find it ironic you call TA a coin toss. FA is based on what you estimate to be the intrinsic value of a security. Evidence has shown that even if you have solid fundamental information, its a coin toss whether the market will take in that information and put it into the stock price. The market only reflects supply/demand values. It does not need to reflect the true value of the security. One could argue that eventually, a security always returns to its true value; that may be true, but how long does that take? securities stay wrongly priced for YEARS. Profiting from FA is easy. Beating the market, making above average returns from FA, now thats a coinflip.

[/ QUOTE ]

Actually your example proves that FA provides market beating returns. If you can buy a stock below IV, and know it's price will eventually converge to IV, you will earn the market return plus the discount you paid over the time it takes for convergence.

It's because efficient market theory tells us stocks should be price to provide similar returns, intrinsic value should equal market price and that price should yield expected market returns going forward. When you find a mispriced stock it's at a discount to IV, by the time price converges with IV it will actually reach IV2, IV of several years from now earning back the discount plus the market returns of those years.

Now this is all general, it doesnt guarantee returns with any single pick due to variance. My Iphone makes it difficult to edit long posts so let me continue....