Posts filed under “Apprenticed Investor”

New Column up at (01/03/08)

RealMoneyThe new Real Money column mentioned yesterday has been moved to the free site.

For some reason, its been retitled: 13 Things You Wish You’d Known in 2007. I much prefer the educational spin of yesterday’s title, Lessons From 2007: A Baker’s Dozen, although I have to admit its kinda clunky as far as titles go.

I listed the 13 bullet points yesterday, here’s a flavor of two of them — one technical, one fundamental:


4. Day-to-day stock action is mostly noise:

This is blasphemy to some people, but it’s true. Markets eventually get pricing right, but the key to understanding this is the word "eventually."

Over the shorter term, markets frequently under- or overprice a stock before settling into the right approximation of value. This process typically occurs over broad lengths of time. Unfortunately, that doesn’t stop some rather suspect interpretations of what these short-term movements mean. I look at these tea readings as Rorschach tests, revealing more about the speaker than they do about the subject.

Case in point: the homebuilders. It seemed that every time there was even the slightest uptick in the group, some bozo would declare that the bottom of the real estate cycle was in. Indeed, every dead-cat bounce or short squeeze was trotted out as proof positive that the housing problem was over. Only it wasn’t, and the homebuilders cratered some 70% off their highs. You don’t need to be a technician to know this: The little squiggles on the chart mean a whole lot less than the big squiggles do."

5. P/E matters less than you think:

One of the things I heard a lot this year was "I (dis)like this stock because it has a (high)low P/E." News flash: P/E ratios alone tell you very little about a stock’s future prospects.
If that sounds like blasphemy, please look at a few examples: Google, Apple and Mosaic (MOS) all sported high P/Es at the beginning of the year. Their stocks have done splendidly. On the other hand, back in January, retailers, financials and homebuilders all had reasonably cheap P/Es. (How’d they do?)

It helps if you think of P/Es not as a photo but as video. The direction matters more than the mere number: Were P/Es likely to come down as sales ramped up? Or were P/Es modest because they were at the top of a profit cycle, and were likely to fall? The answer to these questions explains the difference between the winners and losers.

The rest of the column is filled with other such wit and wisdom . . .



13 Things You Wish You’d Known in 2007
Barry Ritholtz,  1/2/2008 2:11 PM EST

Category: Apprenticed Investor, Investing, Markets

New Column up at Real Money (01/02/08)

Category: Apprenticed Investor, Corporate Management, Investing, Markets, Technical Analysis, Trading

Lessons from 2007

Category: Apprenticed Investor, Corporate Management

From Worst to First Second: Business Week Forecast 2007

Category: Apprenticed Investor, Financial Press, Investing, Markets

Goldman Sachs: Sell Tech Selectively

Category: Apprenticed Investor, Corporate Management, Earnings, Technology, Valuation

Follow Up: Nine Stocks for Playing the Long Side Safely

Category: Apprenticed Investor, Financial Press, Investing, Technical Analysis, Trading

3 Things You Need to Do (but Won’t)

Category: Apprenticed Investor, Investing

Lessons From Stock Market Wizards

Category: Apprenticed Investor, Markets, Psychology, Trading

Hulbert’s 4 Big Lessons

Category: Apprenticed Investor, Investing, Markets

Efficient Market/Random Walk Joke

Category: Apprenticed Investor, Hedge Funds, Investing, Markets, Psychology, Quantitative