Category: Money tips Release Date: 2006-05-04
Buffett's Investment Case Study
Buffett in 2004, invested 100 million U.S. dollars to buy South Korean stocks, getting a high return.
Buffett is the reading of Citigroup in South Korea to collect references to some of its customers, the selected stocks to be purchased.
South Korean stock market before the price-earnings ratio in 2005, only seven times (at the time China's stock market price-earnings ratio of 25 times), almost the lowest in the surrounding market. Buffett Sure enough, there is no wrong, last year, the Korean stock market as a whole rose 50 percent, driving MSCI index of Asia-Pacific market (MSCIAP) throughout the year rose 21%. Buffett ultimately profits.
Earnings ratio price-earnings ratio or PE ratio also known as shares, the stock price to its earnings per share ratio, the formula is: price-earnings ratio = Current market price per share / per share after-tax profit. As the price-earnings ratio the stock price and profitability linked to its high or low levels of a certain extent be able to influence investor behavior.
For example, the two share the same price as the 100, its earnings per share were 10 yuan and 5 yuan, then its price-earnings ratio, respectively 10 times and 20 times. If the company's future profitability unchanged, investors profit from the business in return on investment, the former only the latter half of the time. If the two are now the same price-earnings ratio of stocks, to see its investment value, depends on its expected future profit growth, higher-growth species within the same time its future earnings will be more.
Also price-earnings ratio should be linked with other indicators, rather than simply look at its numerical size. If the benchmark interest rate by the impact of price-earnings ratio is generally believed that the benchmark interest rate higher price-earnings ratio will be low, a negative correlation relationship. Price-earnings ratio is also linked with the capital in the United States, small-cap stocks, the average price-earnings ratio price-earnings ratio is higher than the average large-cap stocks several times. Therefore, high or low price-earnings ratio judgments require a mix of factors, rather than the value of small is that the low price-earnings ratio, the investment value of the big. A price-earnings ratio of the negative attitude of Western scholars even think: "10 times price-earnings ratio is too high, but 1000 times too low." ([The U.S.] Kenneth. L. Fisher, 2000)
Indeed, on the one hand from the price-earnings ratio reflects investments in the stock value, but purely from the price-earnings ratio to determine your investment behavior, it is very unwise.
Balao specializes in long-term investment, he said: "If you do not hold a stock for 10 years to prepare, then even 10 minutes have not held such shares." We do not need to study the words, but we need to be carefully studied need to invest in stocks, it's all built-in indicators for its future growth and so on.
