If you ever get a “stock tip,” ignore it. Seriously. The bottom line is that the stock will either rise in value, decline in value, or remain the same. If anyone claims to know more than this, they are either trafficking in illegal information, they have an ulterior motive, or they are deluded. I don’t want my money following ANY of these options.
Excluding the rare (and illegal) insider information, stock tips are nothing more than hunches or guesses, at best. Similar to crab legs at a buffet, they can be good. Or not.
But what if the person is financially savvy and they have studied the company’s financials and have looked at comparative P/E ratios, the company’s market capitalization, the pending macroeconomic impact, and the company’s hedging strategy? Don’t care. They don’t know. If they truly are savvy, they know that they don’t know. Also, if they did have an insight which led them to believe the stock was undervalued, why would they tell you? Why wouldn’t they just buy the heck out of the stock and make a killing? Why are they wasting their time saying, “psst” to you?
Equity markets (and the by-product of stock analysts) are invaluable cogs in our capitalistic economy. I buy and sell stock. I have made money. I have lost money. I’m just saying be careful who you listen to. (Including me.)
2 comments:
this is the kind of straight dope I like.
I don't mean to imply that sound financial analysis is useless or that stock price movement is nothing more than a random wander. It's just that all stocks represent ownership in companies, which all have inherent risk. There are a lot of factors that cannot be predicted. If you find a stock that you believe is undervalued relative to that risk, go for it. (Just DON'T tell me about it.)
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