rickf

Does Valuation Matter?

Frankly given the shaky data that 'analysts' and pundits base their reports and recos on, I think fundamentals and 'value' numbers are fairly meaningles. The past year it's been all about emotion and psychology, not value -- meaning momentum is key. Great stocks can get pummelled into submission because of traders' emotion, not because their 'value' suddenly changes....to that end since last year I've taken any report of 'valuation' or 'cheap' or 'expensive' companies with a BIG grain of salt, because in many cases, the numbers can be fudged rather easily to sustain a few more weeks of price buoyancy. (*cough* BSC, CFC, BAC, UBS, MER, LEH, et.al) With fundamental data being demonstrated as questionable in many of these companies, I really think it's idiotic to place much faith in 'value' calls on a company's numbers. I mean, LEH, C, and UBS may be considered 'value' stocks now but I wouldn't touch them with your money, let alone mine.

Similarly -- the mere fact that 'analysts' and 'rating agencies' still have generally-safe ratings on the mortgage firms (clearly a meaningless rating @ the moment) tells you all you need to know about the concept of 'value' and 'safety' in the market.

The other commenter is correct - it's all about momentum at the moment. P/E, fundies, and such just, in my view, don't matter these days. Perhaps interesting to learn as part of trading homework, but a firm's "valuation" wouldn't be more than 30% of my decision to enter a trade.