Why I Hate the Stock Market
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Thread: Why I Hate the Stock Market

  1. #1
    Senior Member tygrus's Avatar
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    Why I Hate the Stock Market

    1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
    2. Buy said stock
    3. Analyst recommendations at $10 higher than current trading levels.
    4. Company reports strong Q1 earnings, beats street, raises dividend
    5. Stock falls $4
    6. wtf?


  2. #2
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    If you were an investor, you would be pleased to find a well run company in good shape and you would be happy to own it.

    ... As a gambler, you're disappointed to have put your money in the slot, pull the handle, and didn't win.

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    Senior Member Beaver101's Avatar
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    ^ So what went wrong with tygrus' investing steps 1 to 6? Maybe it's a just a timing thing than a gambling thing ...
    Everyone should be respected as an individual, but no one idolized.-A. Einstein

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    Quote Originally Posted by tygrus View Post
    wtf?
    Growth stocks are volatile and usually without a lot of history to back up assumptions.

    Analyst recommendations (buy or sell side) are worthless. If earnings expectations or price recommendations aren't met, don't blame the company - blame the analysts. My advice is to stop reading the drivel that is written by analysts.

    ltr

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    Senior Member none's Avatar
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    The efficient market hypothesis is a reasonable assumption for the VAST majority of investors.

    If there was real evidence the stop would take off the price would already reflect that (assuming insider trading is not occurring and that you're part of it)

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    Quote Originally Posted by tygrus View Post
    1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
    tygrus I think it helps to view the stock market as a mostly irrational place. Stock prices very rarely trade at fair value ... studies by Shiller showed that the stock market (as a whole) spends the majority of its time far away from fair value.

    Stock move for various reasons other than fundamentals. And they can spend 10, 20 or even 30 years severely disconnected from fundamentals.

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    Quote Originally Posted by james4beach View Post
    tygrus I think it helps to view the stock market as a mostly irrational place. Stock prices very rarely trade at fair value ... s
    This makes no sense. If people are willing to buy something at a certain price then it, by definition, is being sold at fair value

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    Quote Originally Posted by none View Post
    This makes no sense. If people are willing to buy something at a certain price then it, by definition, is being sold at fair value
    Well it's a fair price if you define fair as "what two parties are willing to negotiate" but that negotiated price varies wildly from one day to the next.

    But the stock market doesn't trade at fair prices if you define fair as "book value" or "a moderate constant multiple of earnings". By this last definition, the US stock market hasn't been fair valued since about 1992, with the exception of the span of a few days in 2008.

    With stocks overvalued for about 25 years now, we habituate to this and call it normal, but in my opinion it's another illustration of how stocks can go very long stretches away from fair value. Similarly, we could have 30 years of under valuation.

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    Senior Member tygrus's Avatar
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    First time I have bought an individual stock in more than 5 yrs. Usually buy only ETFS. Now I know why.

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    Senior Member none's Avatar
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    Quote Originally Posted by tygrus View Post
    First time I have bought an individual stock in more than 5 yrs. Usually buy only ETFS. Now I know why.
    Yup - GENERALLY, for long term successful investing you want to avoid buying individual stocks and focus on baskets of stocks via ETFs. Of course, buying stocks does give you the possibility of hitting a jackpot but that's not so much investing as gambling.


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