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Stocks and company same or different? What's your opinion?
Have you heard of such premise:
"The biggest mistake a fundamentalist makes is thinking that the stocks and company are the same" and
"The biggest mistake a technician makes is thinking that the stocks and company are different"
What's your opinion?
1 Answer
- bob sharkLv 71 decade agoFavorite Answer
A company is a business, that hopefully makes a profit, The decisions of it's management, and different market conditions, go into making the profit or loss bigger or smaller.
Stock is shares in the company, but while the value of the stock does have some tie in with the profitability or not of the company, the share price reflects more the anticipation of the buyers and sellers of shares in the market.
Hence a profitable company can be going up it Asset value, but the people who buy shares think next year the enconomy will be bad for the company so they sell more of the stock than they buy so the stock price goes down
A fundamentalist, looks at all the monatary measures of a company, and if he feels the stock will always reflect this, he is wrong.
A technician, focusses on stock moves and volumes of stocks bought and sold and makes buying decisions based on momentum instead of intrinsic value, but stock and company are not different and he is wrong.
A stock has a value, but investors will make the share price higher, or lower than the real value, but over time, the share price will move back to real value if it is too high right now, or back to real value if the share price is too low right now,