I think people know about the FA of the market. For example, at $200, they knew the P/E ratio of QCOM was astronomical but disregarded it anyway because it was going up. Besides, the Paine Webber analyst told them that it would go even higher. And this is a guy who is supposed to be an expert at FA!
I think one of the inherent difficulties is that with FA, it is not possible to do any "timing", and in fact, I don't imagine that it is even a tool designed for timing. FA can be out of line with price for significant amounts of time. On the upside, stocks were way overvalued, and at the bottoms, stocks can be way undervalued. And then, if you think about it, P/E will look terrible coming out of the trough because the P will lag the E, just like at the top, when it was the other way around.
So for trading purposes, one might be better served by technical analysis, but it doesn't hurt to know the FA either.
T. |
