..........intrinsic Value Of A Stock.........

jatayoo · #11 25th July 2007, 06:57 PM

Quote:

Originally Posted by alpha1

So this is a simple method of valuation.

Nice.

Dear Alpha
It is not simple. Do have a look at prof damodran's writings after google search on the internet.
It is a bit like cooking.The essential fundamentals have to be rigorously adhered to eg SEVEN TO TEN YEARS % groweth EPS, Sales, ROCE, ROE, TWO TO THREE YEAR TRAILING eps BANDS,RATE OF INFLATION,EXPECTED RETURN(something realistic),co relation between groweth rate and PE band.
***** YOU HAVE THE FREEDOM TO MIX AND MATCH..... More of chilli, less of salt,garlic sauce or tomato sauce?
**** Here experience and wisdom of the financial markets matters and is the deciding factor.

jatayoo · #12 25th July 2007, 06:58 PM

Quote:

Originally Posted by alpha1

So this is a simple method of valuation.

Nice.

Dear Alpha
It is not simple. Do have a look at prof damodran's writings after google search on the internet.
It is a bit like cooking.The essential fundamentals have to be rigorously adhered to eg SEVEN TO TEN YEARS % groweth EPS, Sales, ROCE, ROE, TWO TO THREE YEAR TRAILING eps BANDS,RATE OF INFLATION,EXPECTED RETURN(something realistic),co relation between groweth rate and PE band.
***** YOU HAVE THE FREEDOM TO MIX AND MATCH..... More of chilli, less of salt,garlic sauce or tomato sauce?
**** Here experience and wisdom of the financial markets matters and is the deciding factor.

oxusmorouz · #13 25th July 2007, 07:12 PM

Quote:

Originally Posted by jatayoo

*Keynes theory of Demand Supply applies today, and probably for all times to come.One has to accept this.

Correction. Keynes' theory of demand side economics is challenged, criticized, and proven to work only under a "particular" type of market, similar to our "expert's" FA (Which works with little flaw in a bull market). The demand run post war economic expansion of the US was stalled by something which had little to do with demand. With the crude oil price rise of the 70's due to OPEC's oligarchy was something new to the demand side economists who still continued to effect inflation by creating policies which affect demand, later proven ineffective. With modern schools of economics such as rational expectations thought, neoclassical theories, and monetary economics taking a firm ground, Keynes' concepts provide little value in the current juncture.

Quote:

Originally Posted by jatayoo

**** THE PEOPLE WHO HELD THE ONIONS AT THE HIGHER PRICES IN COLD STORES HIT A LOSS.THEY ARE THE RETAIL INVESTORS WHO DID NOT HAVE THE INFORMATION THAT THE BIG GUYS HAD

Noise trading, noise trading by proxy. Hazardous to wealth undoubtedly.

Quote:

Originally Posted by jatayoo

HENCE THE BEST DEFENSE FOR THE OUTSIDER I.E THE RETAIL investors , IS TO HAVE A CLEAR CONCEPT OF INTRINSIC VALUE.
If the outsider does not have this clear he will be always guessing..... and playing between supports and resistances that the INSIDERS have created in the past.

Considering the few trillion variables which affect prices, what was intrinsic value when the expectations were formed differs from the intrinsic value when the govt announced the supply arrangements. Giving 1 static intrinsic value to a stock merely based on expected earning and expected growth of 1 year doesn't look to be very rational. As famous quote goes, "In the long run, stocks tend to stick onto their intrinsic values" (Hypothesis of fundamental analysts) ..."In the long run, we'll all be dead" (A quote by beloved Maynard Keynes).

Your hypothesis: Stocks tend to stick onto intrinsic values sooner or later. Stocks below their intrinsic values tend to out perform the stocks quoting above the intrinsic value.

For this to hold true, sufficient data to quantify earnings expectations, expected growth, and historical prices of equities should be quantified and tested on the data and the result should agree with your hypothesis.
Till then, it remains a myth, a tale not backable by evidence.

jatayoo · #14 25th July 2007, 10:18 PM

Quote:

Originally Posted by oxusmorouz

Correction. Keynes' theory of demand side economics is challenged, criticized, and proven to work only under a "particular" type of market, similar to our "expert's" FA (Which works with little flaw in a bull market). The demand run post war economic expansion of the US was stalled by something which had little to do with demand. With the crude oil price rise of the 70's due to OPEC's oligarchy was something new to the demand side economists who still continued to effect inflation by creating policies which affect demand, later proven ineffective. With modern schools of economics such as rational expectations thought, neoclassical theories, and monetary economics taking a firm ground, Keynes' concepts provide little value in the current juncture.

Noise trading, noise trading by proxy. Hazardous to wealth undoubtedly.

Considering the few trillion variables which affect prices, what was intrinsic value when the expectations were formed differs from the intrinsic value when the govt announced the supply arrangements. Giving 1 static intrinsic value to a stock merely based on expected earning and expected growth of 1 year doesn't look to be very rational. As famous quote goes, "In the long run, stocks tend to stick onto their intrinsic values" (Hypothesis of fundamental analysts) ..."In the long run, we'll all be dead" (A quote by beloved Maynard Keynes).

Your hypothesis: Stocks tend to stick onto intrinsic values sooner or later. Stocks below their intrinsic values tend to out perform the stocks quoting above the intrinsic value.

For this to hold true, sufficient data to quantify earnings expectations, expected growth, and historical prices of equities should be quantified and tested on the data and the result should agree with your hypothesis.
Till then, it remains a myth, a tale not backable by evidence.

__________________________________________________ ______
HI
I understand the logic of your arguments.Some say that the Markets are perfectly logical and discount all available information.
**The second school of thaught postiluates that the Markets are irrational and tend to the INTRINSIC VALUE now and then.This implies that the Markets are generally overoptimistic or over pesimistic and swing to the INTRINSIC VALUE eventually.
***I remember many people who in 1994/1995 were of the firm view that their is a big bubble and the Markets are going to crash any day to 3000 levels.For then 3000 was the level forever.Then they were afraid at 10,00 12,00 13,000, 14,000 and now 15,000 levels today.They were all Retail Investors.Some of them i do not find on any board at all today.WHY?
****The theory is simple i.e it is the insiders who set the market levels as they have the best of research and industry dynamics.They stop and consolidate when they are not sure.They accumulate slowely when they become bullish .They release the news after acumulation is over so that the retail can jump in.They help in bidding up the price.The biggest insider is the promoter and his cronies.I can give you many examples of this manipulation.
*****So do i stand a chance against them -- guessing their moves all the time.
******Exceptional situations aside, which are rare, Keynes theory holds the test of time.
*******Hence to have an indipendent view that you can stick by thick and thin you need to know the INTRINSIC VALUE at different periods of time.If the Inerest rates change or Inflation goes up i have to adjust my value.It takes a second on excell.
******** I am a beleiver of the fact that the market swings from one extreme to another.If someone beleives differently i agree with his right to differ.

CreditViolet · #15 26th July 2007, 12:04 AM

Quote:

Originally Posted by jatayoo

--------------------------------------------------------------------------------------------------------------------------

I do not think that we will ever get a mathematically perfect method for the capital markets ever.If their was one it would have been found out by now

Maybe there is and maybe its found out already.Only problem would be that those who did it wont write a book about it.

http://en.wikipedia.org/wiki/James_Harris_Simons

CreditViolet · #16 26th July 2007, 12:22 AM

Quote:

Originally Posted by jatayoo

__________________________________________________ ______

****The theory is simple i.e it is the insiders who set the market levels as they have the best of research and industry dynamics.They stop and consolidate when they are not sure.They accumulate slowely when they become bullish .They release the news after acumulation is over so that the retail can jump in.They help in bidding up the price.The biggest insider is the promoter and his cronies.I can give you many examples of this manipulation.
*****So do i stand a chance against them -- guessing their moves all the time.

But the thing is, all this isnt done secretly, it happens on the exchanges, in whole public view and there is no reason at all to guess anything.Anyone with an eye for the unusual could spot how these so called operator activity stick out like a sore thumb.

uasish · #17 26th July 2007, 12:27 AM

Quote:

Originally Posted by jatayoo

HI OXY
DID i HIT the BULL'S EYE with the post above.

http://en.wikipedia.org/wiki/Enterprise_value

I have heard in CNBC ,now a days they use this Metrics ,however FA is never my cup of tea.

alpha1 · #18 26th July 2007, 12:30 AM

DUDE
It would be better if you could use a little bit more of punctuations and seperation of text in paragraphs.

And not use more than two colors.

AND DEFINITLY NO UNDERLINING IN TYPED TEXT.

alpha1 · #19 26th July 2007, 12:43 AM

I would've really liked to go throuh\gh all your post material.

But serioulsy I could only continue till 2-3 lines.
After that my mind refused to understand any signal that my eyes were trying to send.

jatayoo · #20 26th July 2007, 08:15 AM

Quote:

Originally Posted by uasish

http://en.wikipedia.org/wiki/Enterprise_value

I have heard in CNBC ,now a days they use this Metrics ,however FA is never my cup of tea.

-------------------------------------------------------------------------------------------------------------------
HI
I have gone through this concept and have used it for the last 12years.It ia a relative metric to evaluate a stock against it's peers or the sector.It tells you the relative expensiveness of two stocks in the same sector.
*********

Similar Threads for: ..........intrinsic Value Of A Stock.........
Thread	Thread Starter	Forum	Replies	Last Post
ICICI Direct : You cannot trade on this stock:Please select another stock	amitkr	Brokers & Demat Matters	1	11th August 2005 11:49 PM
iit capital stock:You cannot trade on this stock	chopra	Stocks & Shares	2	9th June 2005 08:47 AM