The Art of Valuation.
For most people, this is the scariest part of investing.
Everyone knows that companies like $Microsoft(MSFT.US$ , $Apple(AAPL.US$ , and $Amazon(AMZN.US$ have strong business models.
So why doesn't everyone just buy the *best* businesses!?
Because it could potentially cost you hundreds of thousands long term.
Imagine that you go to the store.![]()
You come across a small money printing machine that prints $100 dollars every single year. 👀
We'll call this small money printer *X*.
Right next to it is another money printing machine.
But this is a BIG money printing machine.
This one print's $1,000 every single year. 🤯
We'll call this BIG money printer *Y*.
So *X* produces $100 a year and *Y* produces $1,000 a year.
So which one should we buy!?
Based on the information given to us, we have no idea.
We need to value these machines.
Ideally, we'd like to see around a 10% return on our money.
We look at the price tag of *Y* (the Big money printer).
It costs $20,000!! 💰
This means we would be getting a 5% return annually on our investment from *Y*. ($1,000/$20,000) = 5%.
Meanwhile, money printer *X* (the small money printer) costs $1,000.
This means we would be getting a 10% return annually on our investment from *Y*. ($100/$1,000) = 10%.
So although money printer *Y* is technically the better machine, we can see better returns from money printer *X*.
Why?
Because of its valuation. 🎨
Want to know the exciting part?
There are undervalued money printers for sale in the market everywhere. 💵
But you have to learn how to uncover them.
Learning how to find them and value them is the key to unlocking a whole new world of investing possibilities. 🔐
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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aoimizu : interesting food for thought, and I agree with you
Recently, I was considering stocks A, B or C with different prices on the market. All have good business models and leadership as of now. I have, say, just $5k to put in, whether in one of them, or spread among them. After watching the ups and down for sometime, I realize that however I wish to distribute my investment, the end profit is just about the same. A lot of info is not transparent to us to make more in one stock over the other. Unless we hold for a long time, then it might become clearer which ones have longer runways and which are riskier.
L3Joe : As Warren Buffett once said in a letter to his shareholders, “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Crefuthope : But overbought can continue to overbuy, strength can continue to be strong