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This is very, very wrong. The technology is not what drives the stock price of a company. What does drive it? It takes years of studying finance to learn. Your
by edanm 11y ago
This is very, very wrong.
The technology is not what drives the stock price of a company. What does drive it? It takes years of studying finance to learn. Your statement is akin to a trader telling another trader that, since they specialize in studying Apple, they could probably be great at being iOS app developers.
"[...] if you know a company well and you know they are doing great and will be doing great in the next year you should buy their stock"
This is an example of a very common fallacy. Even if I tell you that e.g. Apple will be doing great as a company in the next 5 years, that's not a reason to buy their stock. The reason would be if I tell you that their stock is undervalued!
This is one of the first rules you learn in finance - if I can guarantee a future payout stream (e.g. $1000 in 1 year, $2000 in 2, $1500 in 3, $4000 in 4...), I can calculate how much that payout stream is worth now. This is what a companies' stock essentially is - a promise of a future payout stream. So if the stock is trading higher than that stream is worth, then the stock is not a good investment.