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The stock price only reflects the supply and demand of a company’s stock. A lot of people want to have nvidias and Tesla stock, so their price is higher. The p

The stock price only reflects the supply and demand of a company’s stock. A lot of people want to have nvidias and Tesla stock, so their price is higher. The problem is all those people writing financial pornography about the stock market. That can give you the impression that there is more to the stock price than that.

saddlerustle 6y ago
The fundamental value of a stock is the net present value of future cashflows that stock entitles you to. Buyers and sellers are welcome to believe otherwise, but in the long run they will lose money.
- jkinudsjknds 6y ago
  Not especially useful advice if the long run is longer than your lifetime. npv of cashflows is not a useful metric for most popular stocks
- jaekash 6y ago
  > Buyers and sellers are welcome to believe otherwise, but in the long run they will lose money. Not if they sell it to someone else for a higher price.
  - pjc50 6y ago
    Someone will lose money, but you can't rely on Softbank throwing another billion dollars down a hole every time you've a tech disappointment to unload.
    - mercer 6y ago
      well to be fair that hole can be metaphorically filled by involving Greensill to help with some creative accounting!
- Denvercoder9 6y ago
  Nowadays the fundamental value of a stock is more what you can convince others to pay for it.
  - phkahler 6y ago
    That's not fundamental, its superficial and the people playing that game are in for a correction.
- AznHisoka 6y ago
  Unless the stock pays a dividend (and a lot of stocks have never paid one), their cashflow never end up in your wallet as a shareholder. Thus the only value you will get is the amount someone else will pay for your stock. Sure they need some cashflow (after all, nobody wants to buy a bankrupt company) but to believe the stock value is a straightforward formula based on cashflows isn’t how the market works. Otherwise Amazon would have plummeted in price long ago.
  - qeternity 6y ago
    Buybacks. The other (and more efficient) method to return capital to shareholders is via buybacks, where the company literally hands you cash in exchange for your shares.
    - AznHisoka 6y ago
      That is true though again, not every company does buybacks.
  - saddlerustle 6y ago
    A company might not do a dividends or buybacks now, but if they are successful they are likely to do so eventually, and that expectancy is worth something just the same.

saddlerustle 6y ago

The fundamental value of a stock is the net present value of future cashflows that stock entitles you to. Buyers and sellers are welcome to believe otherwise, but in the long run they will lose money.

jkinudsjknds 6y ago
Not especially useful advice if the long run is longer than your lifetime. npv of cashflows is not a useful metric for most popular stocks
jaekash 6y ago
> Buyers and sellers are welcome to believe otherwise, but in the long run they will lose money. Not if they sell it to someone else for a higher price.
- pjc50 6y ago
  Someone will lose money, but you can't rely on Softbank throwing another billion dollars down a hole every time you've a tech disappointment to unload.
  - mercer 6y ago
    well to be fair that hole can be metaphorically filled by involving Greensill to help with some creative accounting!
Denvercoder9 6y ago
Nowadays the fundamental value of a stock is more what you can convince others to pay for it.
- phkahler 6y ago
  That's not fundamental, its superficial and the people playing that game are in for a correction.
AznHisoka 6y ago
Unless the stock pays a dividend (and a lot of stocks have never paid one), their cashflow never end up in your wallet as a shareholder. Thus the only value you will get is the amount someone else will pay for your stock. Sure they need some cashflow (after all, nobody wants to buy a bankrupt company) but to believe the stock value is a straightforward formula based on cashflows isn’t how the market works. Otherwise Amazon would have plummeted in price long ago.
- qeternity 6y ago
  Buybacks. The other (and more efficient) method to return capital to shareholders is via buybacks, where the company literally hands you cash in exchange for your shares.
  - AznHisoka 6y ago
    That is true though again, not every company does buybacks.
- saddlerustle 6y ago
  A company might not do a dividends or buybacks now, but if they are successful they are likely to do so eventually, and that expectancy is worth something just the same.