The Markets Up Chuck

If the first rule of investing is buy low and sell high, then why is everyone doing the opposite? Gripped with FEAR(False Evidence Appearing Real) people are panic selling when America’s best companies are on sale. The stock market is the only store on earth where people behave so foolishly. Imagine walking into a Wal-Mart, the store is jammed with shoppers whose carts are full of merchandise. The manager announces over the PA system that for the next hour everything will be sold for half off. Then the shoppers abandon their carts and head for the parking lot. If you would never do that at the Wal-Mart store, why do you do it at the Stock Market store? Because you’re crazy and missing the investing opportunity of a lifetime. Watch the following FRAT™ Videx™ and see some great bargains of a lifetime.

[youtube 9nzMvxMd2Ic]
(Best to watch in full screen mode.)
Author currently manages portfolios that own Aflac(AFL).

Here are the points: Stock price volatility is nowhere near as relevant as business results. Also, it’s easier to determine the intrinsic value of a business than it is to forecast short-term price action. Business results are measurable based on fundamentals like earnings and cash flows. Short-term price action is often purely emotional and thus unpredictable. Therefore, a smart investor understands that the stock market can and often will mis-appraise a company’s true worth. Empowered by this knowledge they exploit folly and never allow themselves to fall prey to it. Fear and/or greed are the foes of the faddists, but friends of the fundamentalists.

Tags: AFL, Aflac Inc., Bargains, FEAR, great companies can be underpriced, how to determine a bargain price, Paychex Inc., PAYX

This entry was posted on Thursday, February 26th, 2009 at 2:00 pm and is filed under Earnings Growth, Fundamentals, Valuation. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.