| | | Value can mean several things. I see where some people think of value as bottom fishing and some of the companies you'd have to catch "noodling" [1] as opposed to bottom fishing. They assume these noodle stocks are going to come back and set new highs.
When I'm looking at an underperforming sector, which is where most value selections come from, I'm looking for the companies with the stronger performances and I judge that by seeing if the company is outperforming it's sector index. So if I'm looking at consumer staples, I want to own the companies outperforming XLP. If looking at utilities, I want the companies outperforming XLU, etc., or at least has a catalyst that indicates it can beat its sector index.
My thinking is, the strong often get stronger. In addition to this, many people value companies based on past history and the true value of a company is in the future, so when a company that seems overvalued beats expectations, analysts are forced to raise the value of the company but it's always from behind, not leading from the front.
When trying to determine value, when a company raises expectations, what would be the valuation if those expectations are achieved?
I would rather add to COST than buy SBUX. I would rather add to MCD than buy NKE.
[1] Noodling is fishing for catfish using one's bare hands or feet, and is practiced primarily in the southern United States. The noodler places their hand or foot inside a discovered catfish hole in order to catch the fish. Other names for the same activity are used in different regions, primarily in the South and Midwest, and include hogging, dogging, grappling, grabbling, and tickling. |
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