Thank you for your reply. Share prices vary enormously over the course of a year. But a business?s revenue, profit and cash flow rarely change anything like as much as its share price.
The reason for this IMO is that share prices are only a reflection of what people are willing to pay for them at any given time. Sometimes, usually when prices are rising, they?re greedy. When prices fall, they become fearful and rush for the exits (as we are experiencing now). All this emotion can push the share price a long way from its fair value (FKP is currently trading at 50% of its fair value).
What i personally do is trying to benefit from this by buying shares when they?re trading at significantly less than their intrinsic value.
Its not only the hostility of others (the herd) that may prevent us from questioning the status quo. Our will to doubt can be just as powerfully weakened by an internal sense that the market conventions must have a sound basis even if we are not sure what exactly that may be.
I appreciate that you shared your personal experience with us, and i also made losses by buying stocks i thought they looked cheap on fundamentals. However, i dont blame the fundamentals but myself for misreading the fundamentals and not doing enough research.
The concept of value investing (buying a dollar?s worth of value for 50 cents) is logically sound and it would never fail if implemented correctly by doing enough research and by looking at the big picture.
Finally, in relation to the charts, i used to use them in the past and now i am convinced that they aint better than tossing a coin! Technical analysis is based on a cognitive bias called "clustering illusion" which is the tendency to attribute patterns and underlying causes to random events when there are none. We believe that it works because of another cognitive bias "confirmation bias" which is the tendency to look for information that confirms our existing preconceptions, making it more likely to ignore or neglect data that disconfirms our beliefs, in other words we remember the events when TA helped us to predict the future accurately and turn a blinded eye on events when it fails.
FKP Price at posting:
51.6¢ Sentiment: Buy Disclosure: Held
