Today, Noet Ravalo answers a greenie in stock market investing who wondered what would happen to the IPO shares he bought earlier this year when everything was bright and sunny in the stock market and talks of it reaching the 4,400 level next year was rife. The reader asked:
At what point will my shares be considered of no value. Say if bought at P5 per share and value goes down, at what price level will my share be considered lost and gone?Answer: Look inside yourself to find out. How’s that for an answer? He didn’t answer it quite that way, of course, but here’s what he said:
…all these go back to the intrinsic value of the pie. That part is the most absolute concept you will get: YOU deem it either good to buy, passable to hold (just in case) or bad enough to dispose.That’s only if you are buying shares to become a part owner. If you’re buying to trade, it’s a different story.
If you intend to trade stocks (rather than be an owner) then the views of analysts, commentators and the media count only because these views move markets. The views aren’t always fair but unfortunately it’s the market’s handle of reality unless new views prove otherwise.Noet, being a teacher at heart, pushes readers to digest more than just read. He’s not going to give you the answers on a platter. Digesting… Has the recent stock market turmoil cut short what looked to be a full year of IPO fever? Ron Nathan said it almost like an afterthought in his column Quo Vadis. Obviously, companies will be scared now to do an IPO and many will be deferred. When Asian traders went back to work early this morning, perhaps it was already clear to them that stock markets in the region will consolidate today, and they did. The Philippine stock market closed lower at 3,139.46, off the day’s low really. We are not seeing huge swings anymore, though. For mutual fund investors, visit the ICAP website and get a pleasant surprise! The new NAVps table looks so much better. I particularly like the part where you can search for the NAVps of a fund within any period that you like. This has more value to me when I want to find out how funds perform during volatile periods because I can see the daily movement in NAVps, compared with the traditional mutual fund table that only shows the 1-year, 3-year and 5-year returns that smoothen out the returns. Just click on “History.” In more interesting news, this 39-year old hedge fund manager in London did not realize his Maserati has been impounded for three months, intent as he was on roiling stock market. That’s a $160,000 sports car, dude! He paid thousands of pounds in fees just to get back the car. Read about the forgetful fund manager here. Happy long weekend again everyone. August 27 is a special non-working holiday.
Salve,
Why do you think Dr. Noet said he considers "market awareness" as an oxymoron? How could 'market' and 'awareness', used together in a phrase, have contradictory meanings, even if the intention is for special effect only? I have a good guess... but i would like to validate this with yours... Please explain.. (of course, any comment from the pundits and experts here would be welcome too).. Thanks!
Market perception is self fulfilling. When most traders believe prices will go down, their trades reflect that belief and so prices do go down. Value investors ignore the irrational perception and just wait for prices to go back to fundamentals (hopefully sooner than later). Astute traders second guess what the players are thinking to predict where the market will go, and profit by being one step ahead of the pack.
The best way to invest is not to put all your eggs in one basket. Have diversity, understand trends, know the effects of every economic indicators, take a lot of caution, and read the prospectus or any news on the company that you will be going into. Remember, a good company can always have an upward price momentum even on down market.
the key is asking 'how much?' will u be paying for the shares of stocks. when you buy it at a premium (vs intrinsic value), you'd sure be having lower returns. in contrast, when you buy it at a discount, you'd be having higher returns. the price you pay determines your returns.
but the anchor here is knowing how much the business is worth. most asset-based valuation is better and the balance sheet gives us more information to have an informed judgment of the value.
You don't always have to sit down patiently and wait for your stocks to go up to get a whiff of profit.
In fact, in advanced markets like in the US, there is such a thing as "shorting stocks" where an investor can profit when the stock price is actually falling.
Guess what? this is now possible in the Philippine Stock Market on designated marginal securities like Ayala (AC), San Miguel (SMC), Meralco (MER). Some brokerage firms are already offering this capability to their customers.
Need more info?http://parttimeinvestor.blogspot.com/