Posted by: Matthew Maillet
Article by: Pat Dorsey
It's all too easy to think that a stock that has risen sharply is no longer a bargain -- or conversely that shares that have been cut in half must be a good deal. If only investing were that simple.
I learned this the hard way a few years ago. In the summer of 2006 I bought some MasterCard stock after the credit card company went public. In the first few months the shares moved up steadily, but then they rocketed from $70 to $90 in just a week's time. Since I was on an overseas business trip with little time for research, I reflexively sold a chunk of my holdings.
Dumb move. As it turned out, the company's profit margins were growing faster than I had anticipated -- boosting MasterCard's value -- and the shares topped out at $320 a couple of years later. If I had paid more attention to the value of the business, rather than the price of the stock, I might have held on.
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I agree with the author of this article. However, this notion of day-trading and not holding stocks for the company's value can be extremely profitable for the trader if he or she has a plan and sticks to it. I agree looking for stocks with value is good for long-term investments, but not necessarily short-term.
ReplyDelete-Andrew Pia
Very useful and simple formula for unprofessional investors who can get confused in different indicators of stocks' values. - Alma Zhumagulova (group 5A)
ReplyDeleteIt all depends on the investor and what they are comfortable with. Some investors have more time and can invest on a daily basis. While there is more of a risk because the stocks constantly perform good and bad. Much more risk and quicker returns
ReplyDeletePosted by Michael Rivezzo
Very helpful article to clear out people's misconceptions!
ReplyDelete-Ka Lee Angel Lee (2b)