Quote:
Originally Posted by mathjak107
The problem with throwing a value on things is markets may not care what you think it’s worth …
Good stocks are not necessarily good companies and good companies don’t always make good stocks ….
What matters is institutional coverage …..if a stock isn’t covered it will die on the vine no matter how good the company is.
On the other side of things we have all seen crappy companies soar , until they Crash and burn eventually
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Throwing a value on something is just the one of several steps in the process. When valuing a company, I try to ask myself what I would be comfortable paying if I were buying the entire company, and that value is based much more on earnings and balance sheet quality than current stock price.
Good stocks are not necessarily good companies - I agree completely, however if it's not a good company, I avoid it regardless of what the stock does. That's the nature of value investing - you miss many opportunities to make money on some stocks because you've eliminated them due to poor fundamentals or over valuation. In other words, I don't much care what "the market" thinks it's worth. Whether it's crap or over valued quality, I avoid it.
As for institutional coverage, I couldn't care less. There are literally tons of quality micro, small and mid cap companies that you and I have never even heard of out there that don't get the coverage they deserve that are tremendous potential investments. WFG is one that's starting to catch my attention right now. Besides, analysts are wrong just as often as you and I are, why listen to them anyway.
I'm a big believer in reversion to the mean, and a quality company with great earnings, great growth potential, and a solid balance sheet that's undervalued will eventually revert to it's proper value. I've always said my best investment results usually come in years 2 or 3. The last few years have been different, with everything going up, up, up, but that's still what I target, 2 or 3 years, sometimes as long as 5. That's just what a true long term, value based investor does. A great company will eventually draw the attention it deserves.
And yes, crappy companies do soar and then crash, but better they do it in someone else's account than mine.
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