Which factors should be considered while investing in the stock market ?
Stock market


There are two main things I think an investor should constantly focus on, even though various companies in different industries have different focus areas.
- Value
- Price
First, let's define what value and price mean.

Here's a case study from the real world: If you Google Navios Maritime Partners, you'll see the company's stock price...

NMM is a global owner and operator of tanker and dry cargo ships, and they generate revenue by renting out their fleet.
Now, analyzing the stock price of NMM by itself is insufficient to determine whether it is a business worth investing in. This is due to the fact that, while you are aware of the price at which other market participants are prepared to sell you each share (at the time I captured the screenshot, the market cap was $723M at $23.95), you are unaware of the true worth of the business.
In other words, how can you determine whether the amount you're paying to acquire shares in the firm is genuinely a good deal if you have no idea what the company is worth (its value)?
Undoubtedly, you don't.
Let's examine value now that we are aware of the price at which the market is selling NMM ($723M market cap, or $23.95/share). The NMM's assets and liabilities, expressed in USD, are listed below.

I've highlighted NMM's total assets and total liabilities, and it appears that its book value is equal to...
$3.6B - $1.7B = $1.9B
Okay, so NMM would have $1.9B in cash after paying off all of its debts and selling all of its assets.
But what's this? When NMM trades at a $723M market cap and you acquire shares at that price, you're essentially getting $1.2B worth of value for free ($1.9B - $723M). This is because NMM's market cap as of the time I'm writing this is $723M.
This is simply a straightforward illustration of how pricing and value may be used to assess whether a firm is even worthwhile researching and contacting management about.
Now, something to keep in mind...

The objective is to constantly purchase equities below their true value so that your investments would have a "margin of safety."
One of the most successful and straightforward investing techniques is buying and holding.
As you undoubtedly already know, Warren Buffett had the opinion that the secret to a profitable investment was to acquire a wonderful firm when it's on sale and stick onto it for a very long time. He actually produced a compound yearly return of 20.1% between 1965 and 2021.
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DO YOUR OWN RESEARCH, ALWAYS.
About the Creator
williams Bakar
What matters is how much money you make when you're right and how much money you lose when you're wrong, not whether you're right or wrong.


Comments (1)
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