The Worth of "Value Investing"?

[DanielRP]

This principle of "Value Investing" is held in high regard by a lot of prestigious investment circles (or at least so I've heard), including the likes of Warren Buffett, and other stupidly rich people. I wanna be like him!

The emphasis (or at least that i can follow) that is placed on fundamental analysis seems logical to my untrained mind, given that the analysis of a business as an entity and its performance is highly measurable, and the data itself that you are measuring are strict results, not interefered with by human emotion. Share prices however, are purely determined by human emotion, and can't be in any way reflective of the true value of the business (and it is therefore useless to analyse it). I believe this is something a long the lines of the "Value Investing" philosophy.

First of all, have i got this correct, and is this reasoning true/useful? Does it have much of a following on this forum?

Any comment/opinion would be great.

Dan.

 

[mazzatelli1000]

Share prices however, are purely determined by human emotion, and can't be in any way reflective of the true value of the business (and it is therefore useless to analyse it). I believe this is something a long the lines of the "Value Investing" philosophy.

Mate,

Value investing is what Benjamin Graham advocates - i.e. the Intelligent Investor and if I am correct it was in one of your earlier posts.

Unless I am reading the post wrong (been up all night) your first paragraph highlights value investing as what Buffett and the like pursue, while your second paragraph suggests that share prices influenced by human emotion is also "Value Investing"?

When you refer to share prices determined by human emotion - this is more along the lines of perceived value. I would not say it is useless to analyse as there are quite a few technical analysts on this forum that make money from it.

 

[DanielRP]

'Tis quite possible my understanding is flawed.

Is not fundamental analysis a disregard for the analysis of stock prices, charts and the like, and a strict look at business financials and accounting ratios?

I don't mean to insult anybody, but i just feel that stock prices, analysed for the purpose of trying to predict the market, is somewhat difficult given it is driven by the frail and emotional human mind.

Analysing purely "the business" and its "fundamentals" seems logical to me.

 

[mazzatelli1000]

'Tis quite possible my understanding is flawed.

Is not fundamental analysis a disregard for the analysis of stock prices, charts and the like, and a strict look at business financials and accounting ratios?

I don't mean to insult anybody, but i just feel that stock prices, analysed for the purpose of trying to predict the market, is somewhat difficult given it is driven by the frail and emotional human mind.

Analysing purely "the business" and its "fundamentals" seems logical to me.

At the risk of sounding cliched

There are plenty of threads here on fundamental vs. technical and I strongly recommend you look them up.

You have to find what is suited to you and what time frame you will be trading. Each has its pros and cons.

Good Learning