A Lesson Worth Learning. Price does not = Value

Here I am sitting in front of the TV and computer, watching my Bobby Auyeung tv series and studying my stocks at the same time. Thing is, the Pioneer dvd player keeps screwing up the tracking and the disc keeps skipping. So that is affecting my tempo and am finding it difficult to concentrate. Moral of the story is never use a branded dvd player. Shinco works just fine!!!!

Why did I tell this story? How does this link to stock picking? As I have mentioned before, this blog is purely to discuss investments so this definitely links into one of my investment beliefs. Let me explain why...

Basically, buying a Pioneer player is like buying a blue chip stock, the buyer thinks that it is always better to pay for something of a certain brand, track record and enough people singing its praises. Obviously, you will have to pay more for the brand, similar to blue chips, a premium has to be paid. So when a blue chip stock becomes a penny stock, it will almost be like a branded dvd player breaking down after a week.

Buyers believe branded dvd players should cost more because of the advertisements promoting the brand and the so called experts swearing by the product.

Investors believe blue chip stocks should have higher valuations because of the track record, market capitalization, company branding and so called analysts calling for strong buy for the stock.

See the similarities? Hahaha.

The great Warren Buffett once said, " Price is what you pay, but value is what you get."

So this is exactly what I am trying to convey through this example. Price is something which everyone focuses on, but the key is to find value. Regardless of the name, status, price, analyst recommendations etc, a stock is a poor investment if there is no value. So what is value???? Many people ask me...how do I look for value? If I am to put it all down in words, it will be equivalent to writing a book.

Over time, I will be posting more and more articles and I hope to give you a clearer picture of how I find value.

A good company may not mean it is a good investment if the price is not right, however a good investment means a good company selling at a right price.

Simple right? But can you put it to good use? That is the real test. Sometimes I have problems following it myself, the dvd player I bought is the best example. But rest assured, I will be buying a Shinco dvd player the next time round.

Have a good week ahead!

SVI