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#31
12-09-2006, 07:57 PM
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Re: The best investing advice I\'ve heard.
[ QUOTE ]
[ QUOTE ] "Imagine you can only own 10 stocks in your life time before buying a stock." [/ QUOTE ] This is Buffett-Charlie Munger advice. It really only applies to the 1% that have 1 or 2 million $$ from a bunch of friends and relatives 40 years ago. If that doesn't sound like your type of investing, maybe you are in the other 99%. Then use technical analysis for whatever time period makes you comfortable. [/ QUOTE ] FYP [img]/images/graemlins/wink.gif[/img] 
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#33
12-11-2006, 11:39 AM
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Post deleted by Mat Sklansky
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#36
12-15-2006, 01:55 AM
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Re: The best investing advice I\'ve heard.
I'm sure you know a lot more about fundamentals than me, but there's a few points that I think might be a little misleading.
[ QUOTE ] Fundamentals are the basis of every rational investing strategy since fundamentals determine the true value of an investment. [/ QUOTE ] There are many rational investing strategies that don't use fundamentals, although some of these could be boarderline trading. [ QUOTE ] If fundamentals tell you that a company is worth $40 per share, and it declines from $40 to $20 per share, do you wait for it to go up before buying ("don't catch a falling knife")? Why would you want to pay more? Why not buy a bargain when it's a bargain? [/ QUOTE ] People make a lot of money value investing, but there's often a reason why last year's Pop Idol singles are selling for pennies. What if it then declines from $20 to $15? Does that mean you should buy more? Why buy stock that is declining in value, and has been declining in value for some time? Anyway. The best advice I've heard is the answer to this question: How do you know if you've bought a good stock? - Its price goes up.
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#37
12-15-2006, 07:24 AM
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Re: The best investing advice I\'ve heard.
[ QUOTE ]
What if it then declines from $20 to $15? Does that mean you should buy more? [/ QUOTE ] If it's a good company and your view and analysis of it's value hasn't changed then yes.
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#38
12-15-2006, 12:42 PM
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Re: The best investing advice I\'ve heard.
[ QUOTE ]
There are many rational investing strategies that don't use fundamentals, although some of these could be boarderline trading. [/ QUOTE ] Name one. The idea that value is different than price I think is rational and mathematically useful. [ QUOTE ] People make a lot of money value investing, but there's often a reason why last year's Pop Idol singles are selling for pennies. [/ QUOTE ] Pop Idol singles aren't investments. Sometimes a stock price goes down because the value of the company has suffered, and the new price is deserved. But sometimes that isn't true. [ QUOTE ] What if it then declines from $20 to $15? Does that mean you should buy more? [/ QUOTE ] As long as you remain confident that the company's true valuation is substantially higher. [ QUOTE ] Why buy stock that is declining in value, and has been declining in value for some time? [/ QUOTE ] Because if you are right about it's valuation, eventually it will be trading at a much higher price and you will have missed an opportunity. [ QUOTE ] Anyway. The best advice I've heard is the answer to this question: How do you know if you've bought a good stock? - Its price goes up. [/ QUOTE ] This was the justification used by Enron stockholders for many years. Those who looked at it's fundamentals (or lack thereof) shorted the stock. Who ended up being right? Fundamental analysis isn't a panacea. It isn't always right, and isn't always easy. There are many stocks that you simply can't understand their business well enough to have confidence in any valuation estimates. Internet stocks were a great example, Warren Buffett once said if he taught an investing class he'd ask the class to value an internet stock, and flunk anyone who gave an answer. But if the stock is one of those few cases where you can be very confident of it's true value, and the price is declining to a level far below it's true value, you can be very comfortable buying it. I own a huge amount of one stock that has declined from $40 to $30. My basis is $38. I'm not worried about it declining any more (I own too much to buy anymore). If it goes down to $20 or $10 I'll still sleep at night because it has $42 per share in net cash. Eventually management will either return that cash in a dividend, or put it to work making the stock worth a lot more than $42. My ultimate return may be great, or mediocre. But if I'm patient, I can't lose money here. And this is one of my bigger mistakes.
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#40
12-15-2006, 03:33 PM
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Re: The best investing advice I\'ve heard.
[ QUOTE ]
I think there was a time a few years ago that Apple was trading for about $3/share more than its cash on hand. [/ QUOTE ] Yes, but I was smart enough to say it's business wasn't even worth $3 because Steve Jobs was a maniac who could never turn it around, so I didn't buy one share at a split adjusted $7 in 03. I haven't looked at it since, has it gone up at all?
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