Friday, November 30, 2007
Arne Alsin: The rational investor looks beyond price
How do you value a stock? This is the single most important question that an investor has to answer. If you cannot generate an informed estimate of value, you should not be making buy-and-sell decisions.
All rational buyers of assets go through the same exercise. They ask two simple questions: "What does it cost?" and "What is it worth?" If you can look up a stock quote, you can answer the first question. But the answer, by itself, is meaningless.