4 ms·

The correct perspective, aka reality, is that market value gravitates towards the intrinsic value in the long-term. And if you're a very long-term investor, yo

The correct perspective, aka reality, is that market value gravitates towards the intrinsic value in the long-term. And if you're a very long-term investor, you can ignore the market price and just collect the dividends. By intrinsic value I mean the sum of all expected future cash-flows where each cash flow is adjusted for time and variance (risk).

throw14082020 6y ago
This is the conventional retail investor perspective. But also, its a tautology. gravitates toward intrinsic value? The current price is the intrinsic value, the market prices in all durations, short or long run. What you're trying to say long term market value correlates with technical analysis, but is this true? You can't prove/ disprove this, because its "intrinsic value" can just be replaced with "price". So IMHO, your words are equivalent to: "The correct perspective, aka reality, is that price gravitates towards the price in the long-term."
- RivieraKid 6y ago
  I would say that what you're saying is the typical retail perspective, this view is common. Market price and intrinsic value are different concepts. Google Aswath Damodaran's writing on this topic. When GameStop was $400, the price was well above intrinsic value for example so I knew it would gravitate down.
rdtwo 6y ago
That’s fundamentally true because all stock values tend to go to zero over a long enough period of time. Not a lot of companies survive 100 years for example
- RivieraKid 6y ago
  If a company goes bankrupt, you can get a good estimate of the true intrinsic value at a previous point in time by summing all cash flows paid to shareholders adjusted for time and estimated risk.
Galanwe 6y ago
> The correct perspective, aka reality, is that market value gravitates towards the intrinsic value in the long-term. What makes that the "correct perspective"? If you started doing value investing in 1990 and stopped 30Y later today, you would have perform less than the benchmark, so your definition of "long term" could very well be longer than the whole investment horizon of some people. > And if you're a very long-term investor, you can ignore the market price and just collect the dividends. Except few companies pay dividends that would even beat inflation nowadays. The trend is more towards share buybacks. In that world, your intrinsic value does not exist, your only way to make a profit is to sell.
- RivieraKid 6y ago
  I never mentioned value investing (not sure what it means), only intrinsic value. Dividend growth of S&P easily beats inflation. Share buybacks are similar to dividends. If you have 100 shares, you can sell few shares to the company and treat it as a dividend.

throw14082020 6y ago

This is the conventional retail investor perspective. But also, its a tautology. gravitates toward intrinsic value? The current price is the intrinsic value, the market prices in all durations, short or long run. What you're trying to say long term market value correlates with technical analysis, but is this true? You can't prove/ disprove this, because its "intrinsic value" can just be replaced with "price". So IMHO, your words are equivalent to: "The correct perspective, aka reality, is that price gravitates towards the price in the long-term."

RivieraKid 6y ago
I would say that what you're saying is the typical retail perspective, this view is common. Market price and intrinsic value are different concepts. Google Aswath Damodaran's writing on this topic. When GameStop was $400, the price was well above intrinsic value for example so I knew it would gravitate down.

rdtwo 6y ago

That’s fundamentally true because all stock values tend to go to zero over a long enough period of time. Not a lot of companies survive 100 years for example

RivieraKid 6y ago
If a company goes bankrupt, you can get a good estimate of the true intrinsic value at a previous point in time by summing all cash flows paid to shareholders adjusted for time and estimated risk.

Galanwe 6y ago

> The correct perspective, aka reality, is that market value gravitates towards the intrinsic value in the long-term. What makes that the "correct perspective"? If you started doing value investing in 1990 and stopped 30Y later today, you would have perform less than the benchmark, so your definition of "long term" could very well be longer than the whole investment horizon of some people. > And if you're a very long-term investor, you can ignore the market price and just collect the dividends. Except few companies pay dividends that would even beat inflation nowadays. The trend is more towards share buybacks. In that world, your intrinsic value does not exist, your only way to make a profit is to sell.

RivieraKid 6y ago
I never mentioned value investing (not sure what it means), only intrinsic value. Dividend growth of S&P easily beats inflation. Share buybacks are similar to dividends. If you have 100 shares, you can sell few shares to the company and treat it as a dividend.