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Biggest Beginning Mistake in Investing



May 30, 2007 – Comments (5)

One of the most annoying things that I often hear about stocks is... "O... well this company is gonna do great, I love their product!" And then they go buy it... Or I hear something similar as a "CAPS" pitch, not coincidentally buy a very low-rated player. People must think of stocks in a different way. Every time you buy a stock, there is someone on the other hand who is selling it. You are basically saying, I know more than you about the companys future. If you just say "O, well this is going to do great, I love their product" Well, the person selling that probably knows just as much (and more) about the company than you do. The question is, "Is the excitement/future profitability already factored into the stock price?" That is why one should VALUE companies by making future price targetsin my point of view, for if you just buy companies hoping they will do well, then you are merely a speculator, and not an investor. Now, there is certainly something to be said about buying great companies, but I would rather buy great companies... AT GREAT PRICES... than just buy great companies and hope they do well, for many times people are TOO excited about a stock and it is grossly overvalued, even if it is a great company. If you want to know how I value stocks, send me a post, and I will try to explain it.

 The 16-year old Prodigy,


5 Comments – Post Your Own

#1) On May 30, 2007 at 11:41 AM, Imperial1964 (94.60) wrote:

As a beginning value investor, I'm always interested in learning how to better evaluate stocks, especially in terms of intrinsic value.

I sort-of explain my methods in my April 10 blog.  How do you pick a bargain?

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#2) On May 30, 2007 at 12:02 PM, tranc3 (75.03) wrote:

So how do you value your stocks?

There is also a very important thing to look at before you place valuations, which is fundamentals. Why value a stock if the fundamentals suck? If a company has great fundamentals, and it is undervalued, then your valuation should that much stronger. Do you have any system of your own to research fundamentals?

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#3) On June 08, 2007 at 7:12 PM, dwot (29.30) wrote:

I will enjoy following your posts prodigy.  I am looking forward to seeing your valuation post on google.

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#4) On June 08, 2007 at 7:15 PM, dwot (29.30) wrote:

Just out of curiosity, are you 16 years old, or 16 years on the stock market?

 BTW, I recently had a student that doubled his portfolio in 8 weeks on virtual stock exchange on market watch.

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#5) On June 23, 2007 at 10:09 AM, XMFConnor (96.48) wrote:

There are obviously many ways to find winning stocks, and I try to use many of them. My philisopy is that there are tons of stocks out there... so I can afford to be picky. I don't have to "settle" for something I'm not completely comfortable with... and this is important because what happens if your not COMPLETELY comfortable and CONFIDENT in your picks... then when the market takes a nosedive... you panic just like the rest of them and miss out on great bargains. So I'm picky... I hate to take too much risk... there is no reason for it in my mind. There are plenty of stocks out there that have GREAT potential with very limited downside and these are my favorites. For example, I am not going to invest in too many airline companies or medical stocks... I just don't need them in my real portfolio or CAPS. Sure, there is great upside in medical stocks, but unless I really understand them, I should leave those to the doctors and focus on what I understand. I am going to go try to find the actual analysis I did on Google (in terms of valuation) and when I do I will post it.

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