04.07.19
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INVESTMENT
guments and analysis can help
form your own ideas about the
prospects for a quoted company.
But their predictions are not
always right.
You should treat projected
price targets with caution, es-
pecially if they are predicated
upon complex maths and es-
timated earnings far into the
future.
In 1958, Benjamin Graham,
the father of value investing
wrote in his classic book, e
Intelligent Investor: "e com-
bination of precise formulas
with highly precise assump-
tions can be used to establish
or rather to justify practically
any value one wished, however
high."
Some analysts may not be im-
partial, which can affect their
views. is is worth consider-
ing when deciding to go with
their recommendations.
7. Markets are efficient
Many private investors as-
sume that the markets are effi-
cient, and the price of a stock
accurately reflects its value or
intrinsic worth. But there can
be factors at play that distort
the price of different shares.
Fund Manager Neil Wood-
ford explains: "e best finan-
cial lesson I learnt was to ques-
tion the notion that markets
are efficient. Economics is the
study of human behaviour as
much as anything else, and I'm
not sure this can be explained
in the same way that you can
describe how ice crystals are
formed.
"I believe the best way to add
value is to focus on fundamen-
tals (by which I mean the real
performance of a business and
the real activity in the econ-
omy) and focus on value, not
price. In the short term, the
market can be profoundly in-
efficient and obsessed with
things that have very little rele-
vance to the long-term success
of a company or an economy."
debunked
Use your common sense; investing can open
up a world of financial opportunities
