Skip to main content

Stock Price and Fundamentals

Jim Cramer:
Even at the height of my firm, Cramer Berkowirtz, I managed only about $450 million for a bunch of wealthy families, a pittance compared to the major mutual funds arid some large hedge funds that control the marginal dollar that determines stock prices at the end of' the day. I mention this to drill into your head the importance considering supply and demand of the stock at all times. That's because way too many people get confused; they think we are trading the actual companies themselves, that the pieces of paper we are trading, investing, owning, are sort of redemptive right, a coupon that will give you certain cents off, or an ownership right that will allow You to have a chunk of the brick and. mortar if not the cash in the treasury of' the joint, Untrue. These are, in the end, simply pieces of paper, to be bought, sold, or manipulated up and down by those with more capital than others. All other investment books stress the linkage between the stock and the company. Me? I stress the abject lack of short-term linkage and the opportunities that such an unconnectedness presents. While it is true that over the very, very long term-say your lifetime-stocks should indeed reflect the fundamentals, over the short term, the twelve- to eighteen-month time frame that is most applicable to most owners these days like it or not that's how long most stocks are held-the fundamentals of the company play only a part in what moves a stock up or down. In fact, I believe the reason that so many professional managers and amateurs fail to beat the market or make big money is that: they are way too hung up on the largely artificial linkage, short-term, between a company's health and the health of the stock. I think that deep down they like the linkage because it makes them feel that they aren't gambling with their money (or their clients' money). They think that if they stay focused on the fundamentals they have turned gambling into investing. I wish I could be so glib. I wish I could focus only on the company arid not the stock, because it would be much easier. But it would also be much less lucrative.

Labels:

Comments

Post a Comment

Popular posts from this blog

How to do technical analysis for stocks?

I started investing in stock market about 20 years ago. Initially subscribing to IPOs. I had not have luck with IPOs. All of them ended with money losing deal, even though I held on to them for a few years. So, I concluded that the IPOs in Singapore market is over priced. Then I started to read analyst reports on stocks and invest in companies (typically blue chips). Not much profit but good dividends during the good years. Then, came the financial crises. I went on to buy blue chip companies during crises and I held them over the years and sold of a about 120% gain over 5 years on average. Due to some distraction, I stayed away from the market during this crisis and missed the opportunity to buy during the lows. Recently (few months ago), I had been doing some stock trading and currency trading using technical analysis method for more than a year. So far, I had tried many different technical analysis using different indicators (Moving averages, MACD, RMO, Fibonacci, Stochastics, RSI e...
Post a Comment
Read more

Trading systems

Here are some trading systems that can be used for trend following trading: ATR Channel Breakout : A volatility channel system that uses ATR as the volatility measure. Bollinger Breakout : A volatility channel system that uses the standard deviation as the volatility measure. Donchian Trend : A breakout system with a trend filter. Donchian Trend with Time Exit : A breakout system with a trend filter and a time-based exit. Dual Moving Average : A system that buys and sells when a faster moving average crosses over a slower moving average. Unlike the other systems, this system is always in the market, either long or short. Triple Moving Average : A system that buys and sells when a faster moving average crosses over a slower moving average but only in the direction of the major trend defined by a very slow-moving average.
Post a Comment
Read more

Professional Investor's advice, market hype etc.

This is an article that I read on 26th September 2012. It has been over a year now and I suddenly remembered. I'd posted this last year with some other predictions from CNBC etc. During then, I was very fascinated listening to these experts. They are so confident and so logical. I always admire their ability to "read" the market and manage hundreds of millions of dollars of other people's money. So of them managed billions of dollars. Then I thought what if they ever go wrong? Won't they lose a lot of money? So, I think it would have been interesting to remember what they said and then we verify later. On 26th September, the S&P 500 index closed at 1433.32. One year went on and it went up another 19% from there. Below is S&P 500 over last one and a half year. As we can see, the market has still been a bull. Over the one year period, the S&P 500 index did correct itself. However, it was a
Post a Comment
Read more