Price alone does not determine risk
If higher price = higher risk then $Berkshire Hathaway-A(BRK.A.US$ is the world most riskier stock at USD450k a stock. Then penny stock is the world least risky asset. $EVERGRANDE(03333.HK$ is now USD0.21 so is Berkshire 2.1million time riskier than Evergrande?
Hypothetically if a company have 1billion in cash with no debt and have only 1 share, it is crazy not to buy it for close to 1billion for that share. If you get it at 1million you basically can close the entire company, and pocket the 1billion.
I keep seeing retail investors commenting in $Grab Holdings(GRAB.US$ $Futu Holdings Ltd(FUTU.US$ $UP Fintech(TIGR.US$ $Palantir(PLTR.US$ $DiDi Global (Delisted)(DIDI.US$ throwing up prices like it is going to be USD1000, USD0.01, USD100, USD1 but do not talk about value of the company when giving these price target. So I think we really need to understand that price is not the only thing to look out for, and that is why we need to look at the value of the company and then use price and shares outstanding (a.k.a market cap) or other ratio such as price to earning, price to sales, price to book, etc to see if the company is over or undervalued.
Risk increase when company is overvalued. The more overvalued it is, the higher the risk as the company will need to perform crazy leaps in order to meet expectations. Once expectations is not met, price of the stock will tumble down.
It is true that as price goes higher, it will reduce the number of investors as in Berkshires case. No ordinary retail investor got the cash to buy it. So it is harder to cash out if you need to as compared to cheaper stocks. However, it is liquidity (or number of buyers) that affects that liquidation risk. Price may have a positive correlation to it with a small R square value to liquidity, but there are many other factors that affect liquidity too such as market sentiment, ongoing fraud investigation, delisting news, etc etc.
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Pierce Khoo : What do you think about other holding companies like MBH corporation or SPLP?
doctorpot1OP Pierce Khoo: They are not on my watch list so I don't know much about them. For now, I'm investing my time on a few selected stocks (mainly beaten down China stock) so I can spend more time understanding, evaluating and tracking them and their external factors.
High Profit Low Loss : When valuing a company isn’t that cash flow of a company is an important metric to look out ?
Thank you!
doctorpot1OP High Profit Low Loss: yes it is an important metric to evaluate and one common model is discounted free cash flow model. it is good to look at a company from many angels using many different relevant metrics and also compare it against competitors