In stock trading, it is very important to know or to calculate the perceived value of a stock to buy or sell. Share market is a complex market where every single financial information affects the price. In a bull market, everybody gains more or less, but in a bear market, very few traders gain.
In a bull market, you will find many people advise you to buy this and that share, this will be good, that will issue right, another will declare bonus and so on. You will find hundreds of people in the forum or group will tell what to buy, at what price to buy, how long to hold, at what price to sell bla bla bla…. You will find also some rumorist to spread rumor in the open forum or even in the broker house to buy a specific share. But when market turns to bear, you will find nobody beside you, rumorist will go to hibernation. I have nothing to say when market goes bullish. All of your well wisher will guide you, advise you and you also will show interest to advise others. But in bear, as I said earlier you will find nobody.
At what price I shall buy or sell a stock?
This is a vital question. Every share has its fundamental, Some has good fundamentals, others not. In my experience, I observed that even more reliable technical indicators betray. Technical analysis shows a bullish trend in price but market says opposite. So it is very important to know the basic strength of a stock. The answer of the question lies with the fundamentals of a stock.
Does market always follow the fundamentals?
No. Many a times you will find that shares with good fundamentals are loosing price whether junk shares ( shares having very poor fundamentals) are going sky high. During the bullish trend, many people come to stock market , **** with the share and bags huge profit. Small investors sometimes gain but many a times they fall in the trap of the gamblers. To the best of my knowledge, I have observed that Technical analysis indicates very good in bullish market whereas Fundamental analysis save your capital in bear market.
Which fundamentals should be considered to select a stock?
I have already discussed it in another article. I tell here in short:
EPS
EPS Growth
NPAT (Net Profit After Tax)
NPAT Growth
ROE ( Return on Equity)
RPS(Relative Price Strength)
There are some other indicators which actually cannot represent the strength of a stock. To know the approximate price you have to consider the above 6 data only. P/E, Dividend Yield, Price/NAV ratio are of no use to know the strength of a stock. P/E tells you how much the price is higher than its eps, Dividend Yield only shows how much have you gained from our investment and Price/NAV shows how much the price is higher than its book value.
But how can I know the perceived value of a stock?
This is a million dollar question. Well, I conclude here with the list. Basing on the above data, I have calculated the perceived value range of a stock. If market price goes below the range, you may consider it to buy and when it goes upper the range you may consider it to sell. Please do not ask me how you calculate the price. I do not intend to write it here. I have kept only 56 stocks in the list whose price are below or in between the range.
Here is the link:
http://www.4shared.com/document/cGh65qEh/Perceived_value.html
Please be informed that the list is absolutely my personal. I have followed it and made good profit. This list does not ensure you to gain. Use at your own risk.
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What is the approximate price to buy and sell a stock?
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Originally Posted by Tania Mehjabeen Khan: