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Visa to the Fair Stock Value World

28 March 2008 - Features - Editor

Fair stock value drives all trading and investment. It is a subjective matter. Experts rarely agree on how much stock is worth. The stock price which prevails at any one point in time is buffeted up and down by innumerable traders. Only stock brokers gain no matter which way a stock price moves.

Opinions about true stock value differ because no one is sure of the future. Not every stock investor operates in the same time horizon either. A decision that looks right today may be a recipe for future disaster. The reverse is equally true. Many top stock analysts are proved to be entirely wrong. What should you do?

A visa is all about questions. You can only enter another country if you provide satisfactory answers to uncomfortable questions. How long will you stay? What is the purpose of your visit? No government likes to play nurse maid to potential immigrants. A professional bureaucrat can spot an illegal immigrant with such a few questions. It is the same with stock investment. Just ask a host of questions that start with two magic words:

‘What if’?

‘What if’ questions assumptions. Every stock appraisal includes assumptions. Some may be sub-conscious. There will be assumptions behind every line of a financial statement. Here are some examples of ‘what if’ questions that can uncover true stock value:

  • What if demand falls off?
  • What if competitors attack Gross Margins?
  • What if customers refuse to pay for cost inflation?
  • What if logistics and distribution are affected by crude oil prices?
  • What if trade unions win major pay hikes?

Commission our professional services to ask ‘what if’ questions and find out fair stock value on your behalf. It could help you with better stock picks. Join our forum to discuss this and other stock market topics.

Tags:

stock value, financial statement, price, gross margin

 



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