In my opinion, the market is no different than Las Vegas or Atlantic City. You are to a certain degree gambling your money. In the market you have a better gauge because of what the analysts say and you can see the cheat sheet of what a company is doing. But let's face it, no one really knows for sure.So how does one figure out stock value? Well, there is the textbook answer and what I always term the real life answer. The textbook answer refers to reported and/or projected earnings, PE ratios, future outlook, inventory, present and/or projected revenues, book value and beta rating, etc. It's a lot to process and absorb, even for a trained professional. As for the real life answer, the true value of any item (stocks included) is what the public is willing to pay.Using the textbook example may indicate a $20 value for a stock, but if investors feel it is worth $40 and are willing to place their orders at that amount, then that is what the stock is actually worth because that is what we as consumers or investors are willing to pay for it. The reverse can also be true in driving down that $20 stock to only $7 because we feel that's all it's worth.So how's business in figuring out stock value? Always remember, "The trend is your friend." Statistics should never be completely discounted, but neither should the trend of investor demand.Joseph J. Palumbo III is the managing director for the Palco Group Inc. The Palco Group deals in asset management, private finance funding, and business consulting. Palumbo can be reached at email@example.com or 718-461-8317, 516-297-4034.
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