Entering text into the input field will update the search result below

Base Your Purchase on Absolute Value - Not Relative

Jan. 03, 2011 5:24 AM ET
Greg Herman profile picture
Greg Herman's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

You should think of buying a stock as buying a business... otherwise you aren't making an investment, you are merely speculating. This means that you must base a purchase based on the absolute numbers, just as someone buying a small business would. If the price of a stock was trading at 30 times earnings in the stock market, but it was relatively cheap, why would you buy it. That is no different from buying a private business for $5 Million, while it is only earning $133,333 a year?!? This is a terrible investment decision, but many people will go out and make purcahses just like this every single day. I'll let them go do that and wait for the prices come back to my level. I like using the term time arbatrage to describe my investing style. I don't really care if other people come to use this type of value method in the future, but will profit greatly as long as people make irrational investing decisions based on gaming the market.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.