Image Source: Mike Mozart, Flickr

Walmart WMT versus Target TGT

As a value investor, it’s really important to understand just how important valuation is regarding making sound, long-term and profitable and successful investment decisions. A lot of people don’t understand this. Most people tend to be price focused. There is an acronym called EDMP that stands for earnings determine market price in the long run. There is also a short run acronym EDMP that’s emotions determine market price in the short run, and that can be fear or greed primarily.

The point is, another thing that people often fail to consider is that the markets often misappraise stocks, they often will way overvalue a stock and often way undervalue a stock, and they very often value it just right. Because the idea of value investing is to invest in the business when you are buying it where the fundamentals justify the price you pay, and also allow you to participate in the growth of the business.

Video Length: 00:19:38

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