<If I saw one section correctly, the best correlation for valuation to price movement was about 55%. Is that right? If so, that is weak.>
The best correlation was about 96%. You really should have looked harder.
<For instance, on the qualitative side, what type of business (and especially revenue) model do they have (is it being threatened by a major law suit?), how diversified is it's customer base, is it a brand or commodity business, is the market saturated, etc.>
I agree, but in order to interpret the resultant value of the qualitative aspects, you need quantitative abilities. A good example is the post that you made earlier concerning the put warrants. You realize that MSFT had put warrants outstanding and is in a saturated consumer market while simultaneously going after a quickly expanding enterprise market - which gives rise to the possibility of uncertainty (read risk). Yet, armed with this information, you did not seem to understand how to translate that into a valid, measurable, quantitative conclusion. This is, IMHO, a problem. the difference betweem readily losing 1/3 of your owner's equity and MSFT's current situation is extreme, yet you persisted that MSFT had 1/3 of its equity at risk.
This is further exacerbated by your comment of risk adjusted return, although you did not seem to be able to quantify the risk or the return.
As for Peter Lynch, you can use P/E as a guage IF you are able to properly reconcile the E, which most do not do.
<I also think your test is designed to make small investors think they need your advice.>
My site is aimed at institutions. |
