Intrinsic Value of Stocks
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A practical matter in stock investing is understanding and using intrinsic stock value. Knowing and using intrinsic stock value comes from doing your homework. It starts with fundamental analysis of ...
A practical matter in stock investing is understanding and using intrinsic stock value. Knowing and using intrinsic stock value comes from doing your homework. It starts with fundamental analysis of stocks looking at the price to earnings ratio, cash flow ratios, price to sales ratio, the quick ratio, and developing risk reward ratios in stock investment. The concept of an intrinsic stock value emerged during the dark days of the Great Depression. The stock market had flourished during the 1920’s and crashed in 1929 leaving many stock market investors the worse for the experience. At the time the stock market investing was considered little better than gambling. An economist and investor, Benjamin Graham, came up with the concepts of intrinsic stock value and a margin of safety. He and others demonstrated that stock investing could be done rationally and profitably so long as investors and traders heeded the results of fundamental and technical analysis of stocks.
Investors and traders buy stocks and sell stock in expectation of profit. The plain facts of the world of investing is that without the gift of seeing the future it is impossible to always know which stocks will go up or down in price. In order improve the odds of making accurate predictions investors and traders have used time honored tools such as Candlestick chart analysis in order to see and exploit Candlestick pattern formations. This use of price pattern analysis goes back to rice trading in ancient Japan and is useful to today in options trading, commodity trading, futures trading and stock trading. However, the time horizon of Candlestick charts is typically short and medium term. Using these tools the investor and trader will typically be able to pick the most advantageous price at which to enter or exit the market.
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