Just a word of caution here. Intrinsic value is determined by market assumptions (Coe and terminal growth or market multiple etc). Markets have been largely influenced by liquidity in the last 10 years so using a 10Y av multiple in such case may still be ascribing Too little mos in a large global liquidity event. At the end of the day, your definition of what is crowd what is not.. is trying to split fine hairs. u may be happy to buy a stock that will give u 10% annualized returns today using multiple of 18x but in a liquidity drain event that multiple may only be 15x (less money in market overall so caps overall valuation). Assuming all else equal, ur annualized return will be less than 10% and it will be a large drawdown at the start before recovering so impact on IRR not low.
Reply to @Zumou80 : I've gotten an answer from the above definition of a psychological crowd, so good for you if you can get something from it. Yield is always an important focus, especially free cash flow yield, but when the whole market is selling in a panic or in a bubble, being aware of our own emotional state may help to rein our actions.
There's never a bad time to talk about crowds and herd mentality. Hahaha
The way I see it, it boils down to one fundamental question which is more applicable to those who practise FA: Can you, as an individual, have enough conviction in your analysis such that it stays the same 1) no matter how much the price fluctuates and 2) no matter what others say?
If your decision or analysis can so easily be wavered by the opinions of others and price fluctuation, it raises the question on the underlying reasons for buying a certain stock - you are probably part of the crowd. That is not to say that we should not listen to alternative viewpoints, but rather, take in every opinion and evaluate which ones are noise. And noise is usually motivated by emotions such as fear or greed.
Oh, and it goes without saying that those who make decisions purely based on the opinions of others (no matter how godly the source of info is) are by definition, PART OF THE CROWD.
tl;dr
can make well-informed and independent opinions = individual
anything else = crowd
Invest based on huat
Reply to @slapmeplease : the best way to invest
Just a word of caution here. Intrinsic value is determined by market assumptions (Coe and terminal growth or market multiple etc). Markets have been largely influenced by liquidity in the last 10 years so using a 10Y av multiple in such case may still be ascribing Too little mos in a large global liquidity event. At the end of the day, your definition of what is crowd what is not.. is trying to split fine hairs. u may be happy to buy a stock that will give u 10% annualized returns today using multiple of 18x but in a liquidity drain event that multiple may only be 15x (less money in market overall so caps overall valuation). Assuming all else equal, ur annualized return will be less than 10% and it will be a large drawdown at the start before recovering so impact on IRR not low.
Reply to @Zumou80 : I've gotten an answer from the above definition of a psychological crowd, so good for you if you can get something from it. Yield is always an important focus, especially free cash flow yield, but when the whole market is selling in a panic or in a bubble, being aware of our own emotional state may help to rein our actions.
There's never a bad time to talk about crowds and herd mentality. Hahaha
The way I see it, it boils down to one fundamental question which is more applicable to those who practise FA: Can you, as an individual, have enough conviction in your analysis such that it stays the same 1) no matter how much the price fluctuates and 2) no matter what others say?
If your decision or analysis can so easily be wavered by the opinions of others and price fluctuation, it raises the question on the underlying reasons for buying a certain stock - you are probably part of the crowd. That is not to say that we should not listen to alternative viewpoints, but rather, take in every opinion and evaluate which ones are noise. And noise is usually motivated by emotions such as fear or greed.
Oh, and it goes without saying that those who make decisions purely based on the opinions of others (no matter how godly the source of info is) are by definition, PART OF THE CROWD.
tl;dr
can make well-informed and independent opinions = individual
anything else = crowd