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This ignores inflation and other factors in the macro environment. But ultimately, any argument that a stock is mispriced is definitionally wrong, because the p
by TechBro8615 3y ago
This ignores inflation and other factors in the macro environment. But ultimately, any argument that a stock is mispriced is definitionally wrong, because the price of a stock is what someone is willing to pay for it. It's a cliche but it's also an incontrovertible fact, even if people like to ignore it because it invalidates all their arguments.
- dchftcs 3y ago>because the price of a stock is what someone is willing to pay for it. It's only true assuming fully efficient markets, which even academic economists studying markets don't do. The fact someone is willing to pay $100 for one share doesn't mean every share is worth $100. The fair value of a stock should always depend on the expected cash flow you can receive by holding the stock for perpetuity. Nobody can predict the future, so nobody really knows what the fair value is. But, if you had 1 trillion dollars and still wouldn't want to pay 1 trillion to acquire an entire company, because you feel you very likely can't make that 1 trillion back, then it's fair to say the company is not worth 1 trillion to you.