if I didn't know better I'd have thought nemer wrote this:
It's a Value Only If It Goes Up
8/05/02 11:42 AM ET
"Poor is the man who does not know his own intrinsic worth and tends to measure everything by relative value. A man of financial wealth who values himself by his financial net worth is poorer than a poor man who values himself by his intrinsic self-worth."
-- Sidney Madwed
Lots of folks like to argue that since this market has fallen so far, there are now lots of great values out there. They'll point at balance sheets, cash reserves, dividends, earnings projections, etc., to justify their arguments. No matter how compelling the arguments may be, there is only one thing you really need to know: It's not a value if it doesn't go up.
If you are inclined to buy stocks that you feel are good values, try to minimize your risk to some extent by looking for signs of some technical strength. You don't have to become a hard-core chart reader, but this can be a tremendously useful tool for confirming your fundamental conclusions.
No matter how well you think you know the fundamentals of a company, there is always someone else out there who knows more and has far more capital than you do. Those are the folks whose activities you want to monitor, and the way you monitor them is by watching the chart. When they get aggressive with their buying, you have the confirmation that your value thesis may be on the right track.
In the present market, buying "values" that have nothing going from the technical side is an invitation for pain. Perhaps you'll get lucky and snag some good buys near the lows, but the safe play is to wait for proof that the "smart money" sees what you see when hunting for bargains.
I think one of the biggest mistakes average investors make is thinking that they possess some insight or knowledge that everyone else is missing. Someone always knows more than you do, no matter how much research you do. Don't battle those folks. Watch for clues to what they are doing. |
