04-30-2015, 04:17 PM
(04-30-2015, 01:55 PM)Kerim Wrote: And keep in mind that "overvalued," fairly valued," and "undervalued" are ultimately subjective terms. If there was a single agreed-upon way to determine actual value, there would be no stock market. You'll need to develop a set of criteria that you apply, and get comfortable that you'll never know for sure, especially in the short term.
Totally agree with Kerim here - they're all subjective terms.
For example I'd be reluctant to buy a stock priced at 30 p/e if it's growth potential was limited but I just bought into ABF plc at a 30 p/e, Call me crazy but I think it's rapid growth justifies the price.
Looking at JNJ at the moment and it looks fair value from my calculations. What's wrong with paying fair price for a stock that I can buy and hold forever?
I've learnt many lessons (even in my short time investing) about 'waiting' for stocks to become 'undervalued' or to see their p/e's lower only to watch them rocket. Visa is one such example.
Personally I don't even have a problem buying a good quality dividend paying stock that looks after it's shareholders at slightly over fair value.