BOOOYAHOOO!
10-20-2005, 02:22 PM
Bob Pisani who reports for CNBC just did a little tutorial about PE ratios. Many investors buy stocks based on PE's. And if you look at the PE's of the energy stocks you would say they are cheap since most of them have PE's below 10. Here is the mistake most people make when they take a stock's PE as a guage of value. The "E" part, earnings, is based on anal-yst estimates. Therefore, you are basing the prospects for the company you are looking to buy on what the anal-ysts project earnings will be going forward. That is a very dangerous proposition indeed. In actuality the past, current, or forward earnings for a company don't mean squat as far as how high or low the stock price goes. That's right, you heard it here first, earnings in fact do not matter! 8O The only thing that matters is whether or not the person who you are trying to sell your GOOG stock to for 308 is willing to pay 308. If there are no buyers willing to pay 308 then the price is just going to have to go lower, just that simple! So the key to good stock investing is to try and determine when a stock's price is getting too rich for a good supply of buyers to pay. If eggs were 10.00/doz, would you buy? Tain't nuthin different when you are considering whether or not to buy a stock. BOOOYAHOOO's rules of investing! Learn em! Live by em! And the next time you are buying eggs think of me! :lol: