Category: Money Tips Date: 2007-01-24
Volatility of the market values derived from the difference. The same one thing, each person's assessment is different, so the price will have ups and downs. Even out in accordance with a scientific approach to assessing the value, they can only reference, not as a standard, because people have emotions and mentality changes, the changes of value and price is not rational to treat.
The value analysis from the apple tree, we can understand the worth of each individual standards vary widely. There is an old man, wanted to sell an apple tree. Zheke annual production of apples apple tree can sell 100 U.S. dollars, the tree's age there is 15 years. The first customer bid 20 U.S. dollars, because This tree as firewood to sell, only sell 20 U.S. dollars. So he is only willing to liquidation value to buy the tree. The second customer asked to buy out the old original price of 75 dollars, he only willing to book value of 75 U.S. dollars to buy the tree. The third most generous customers, he calculated the 100 × 15 = 1500 yuan price, willing to 1,500 U.S. dollars to buy this tree, this method does not take into account the cost and depreciation, will be too rash of. The fourth customer, net of cost and depreciation to calculate the actual annual profit of only 45 dollars, if he bought strawberry fields, then 100 U.S. dollars per year, investment income 20 U.S. dollars, price-earnings ratio is 5 times earnings capitalized in accordance with the principle of only be able to offer 225 U.S. dollars. The fifth real return customers to a cash discount means that the 250 U.S. dollars is a reasonable price.
These five customers representing different periods of the valuation. When the market is extremely pessimistic, investors were only willing to liquidation value and book value for big pick up bargains when the market is extremely optimistic at the time, investors are willing to 1,500 yuan a large number of sky-high price to buy when the market is relatively rational, investors will capitalization of revenue or cash to buy and sell discounted, we can see the value of analysis is varies, while the price fluctuations is the change with time, value and price rate of change related to changes in investor psychology and timing.
In the long run, the enterprise's internal value will ultimately be reflected in stock prices, but the current stock price does not represent the company's intrinsic value, through value analysis to overcome the short-term fluctuations in the price is an effective method. Its inherent value is not due to the economic cycle ups and downs, so long-term investments can best be Italian. However, if the growth of enterprises unstable, with the economy and the ups and downs, it is difficult to value investing, Buffett insists on not to buy it is for this reason high-tech stocks.
