I didn't realize you were talking #'s as a gauge for whether something was overvalued or not....
In my mind, overvalued is overvalued. #'s are irrelevant, because if something is 20% overvalued (depending on how you determine the value), any selloff can precipitate much larger selloffs that could, potentially, lead to much LARGER undervaluations. It's the psychological effect of daytraders and tech analysts who see a stock break through a "moving average" line - don't try to figure out why (usually there isn't a "why"), and just sell because "once it goes below the 200 day moving average you should sell". That causes a stock to crash through its 250/300 day MAs.....and you have a full fledged crash on you hands.
That's where I step in. If Fundamentals are the same, I take advantage of the tech analysts skittishness. Example: I bought into AOL last night at 87. Today, I'll buy more. AOL rarely falls for more than 3 days in a row. Not to mention, their revenue growth and earnings estimates for the next year create a compelling argument for a stock worth about 120. It won't likely happen in a day or two, but I can see it happening in a month.
ASPT...I agree. I think it was worth 37 when it hit 37. Of course, when the financial worm turned, then maybe it should've fallen back to 20. Problem is, the same effect took place - lots of traders dumped it. So, I doubled down at 8. Glad I did. I see 20 by the end of the summer - if the market recovers, that is. |
