Forum Archive Index - January 2001

[Derek <dkw@paradise.net.nz>]

(1) The good news:
The market is an ass and can't be relied upon to fairly value shares.

(2) The bad news:
The market is an ass and can't be relied upon to fairly value shares.

(1) implies that if you're better at valuing companies that the market then
you can potentially make money should the market re-value the shares higher
and if you hold the shares for long enough  (2) implies that you should be
prepared to hold the shares that you buy for a long time. It also means
that you also should have some cash in reserve for any rights issues.

A guy I know bought some shares in FFS at about 50c (no this is not me, I
paid more than that!). This was because he valued FFS at more than 50c, FFS
fell to 40c, he bought some more on the basis that if they were a buy at
50c then they were a better buy at 40c. The fell further & eventually were
25c. He took up all the rights issue at 25c for the same reason. Now he is
in profit.

Myself who didn't have the cash in reserve am not so well off since I (to
cut a long story short) couldn't take up my rights allocation. Next time
I'll pay more attention to (1) and (2).

Regards,
Derek










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