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For All Your Investing Needs |
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Welcome to the Investing Section of Options Realm |
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As a general rule, I am a fundamental analyst first, and I utilize a business based approach to evaluating a company, which I then apply to the stock. This is a good method if you are willing to wait for the rest of the stock market herd to catch up to your thinking and give you fair value for the company, and one of my basic beliefs about the stock market is that if your stock analysis is accurate, eventually the market will agree with you and give you your anticipated price. Put more concisely, the price of a stock and the value of the underlying business will eventually converge. While investors are waiting for price and value (two distinct measures) to converge, much time can pass and the discrepancy between the stock price and estimated value can reach huge levels. While stock prices are wildly difficult to forecast in the short-term (you can even say they are random a la Malkiel's A Random Walk Down Wall Street), sometimes there will be a setup presented which puts the odds in the trader or speculator's favor. I consider it to be similar to a game of poker, where the cards that are turned are random, the winner of a hand can be random, but the overall winner is often the person who consistently plays with the odds in their favor. If you want to trade, realize the randomness factor is in play - doing so is a humbling but necessary admission. As stated here, both can be profitable if they are done with the right attitude. |
