BWAC-
<<<What do you value the vast physical assets of those companies at? Not the earnings, the assets? (Which of course must produce some sort of return on assets to justify the capitalization.)>>>
I do not focus on studying the fundamentals of my investments in any manner of depth. If I had a desire to value the assets of the companies I trade, I would begin by examining their balance sheets.
<<<Just using PE leaves a lot to question. And granted they are probably still somewhat overvalued.>>>
Yes, I acknowledge that merely using P/E when valuing a company fundamentally is an extremely simplistic method. However, for my purposes as a trader, I prefer to focus on a more technical perspective.
When assessing my trades fundamentally, I realize my analysis only scratches the surface.
The piece I put together on the Dow was a basic fundamental valuation of the Dow which I transpose for my own purposes on the market in general. Yes, these companies have values not apparent in their P/E ratios and growth rates, however, using P/E's and growth rates keeps it simple for me to understand.
As I stated, I trade on a more technical basis, gauging the potential direction and magnitude of moves in particular securities and the market as a whole. I also take a brief glimpse of the fundamental valuation of any security I trade, so I can factor its relative under or overvaluation into my trade.
Though my logic does not take into account all fundamental information available, I am confident that the downside risk on the Dow is quite large. It would not surprise me to see the Dow trade below 8500 in the coming 12 months.
Thank you for your comments on my piece.
JWest |
