Watch a stock

[Plane]

The "I bought the stock because I liked the product, and now I am rich", articles one reads all the time are similar to "man bites dog" articles: they are about people who have been extremely lucky. Articles about people claiming "I bought the stock because I liked the product and I lost money" articles do not get published.

By the way this is an example of the anthropic principle , which you seem to understand already.

[Plane]

How much diffrence do the qualitys of the product and the wisdom of the company management make , compared with the factors that are  the nature of the market?

-----------------------------------------------------------
How could anyone answer such a question? The quality should be above 8 on a scale or 1 to 10, and the management should be four times as smart as Roger Smith of GM? What sort of answer could anyone expect to this question? As I said, fear and greed drive stock buys and sales. It is my belief that these are not measurable in any useful way.

Hahahahahahahahahahahaa!

Great post!

I agree , the human factors are very important but hard to quantify.

[Xavier_Onassis]

Great post!

I agree , the human factors are very important but hard to quantify.

========================================
The issue is not normally how much of a stock to buy, but binary:
not how much you should own, but whether to own it or not to own it at all.

--------------------------------------------------------
By the way this is an example of the anthropic principle , which you seem to understand already.

It is?  I do?

Can you elaborate on this?

[Maccus Germanis]

http://finance.aol.com/quotes/zoltek-companies-inc/zolt/nas

http://www.zoltek.com/

at 27.


I am certain the product will be in demand (carbon fiber ) but is the company being run by dummies?

With a P/E of 144.28, I'd advise that you may look, but don't touch. -But, I'm largely a value investor-
HXL makes enough carbon fiber, and other products, to keep their P/E at 29.71.
DOW - 13.49

Though they don't make carbon fiber, GTI, by making high temp graphite components, earns enough to have a ratio to price (19.58) of 14.36.

And as long as you're content to look, or willing to trade on foreign markets, Toray (3402 JAP) and Unidym (not-publically traded) are interesting.

No, I haven't bought yet, not sure I will. I am planning to watch a few for a while .

A high P/E means a lot of investors have high expectations , this reduces the potential for a large payback somewhat , but if a product has a bright future won't a high P/E naturally occur?

With the type of exposure (carbon fiber) being equal and the quantity of exposure (as might be indicated by market cap 2.15B>908.78M) being less, why would you invest in Zoltek over Hexcel? Hexcel is still too high of a P/E for me, while natural gas producers are experiencing the traditional May sell-off even while energy prices tighten, but HXL seems like a better value exposed to the same growth market as ZOLT.

[Plane]

http://finance.aol.com/quotes/zoltek-companies-inc/zolt/nas

http://www.zoltek.com/

at 27.


I am certain the product will be in demand (carbon fiber ) but is the company being run by dummies?

With a P/E of 144.28, I'd advise that you may look, but don't touch. -But, I'm largely a value investor-
HXL makes enough carbon fiber, and other products, to keep their P/E at 29.71.
DOW - 13.49

Though they don't make carbon fiber, GTI, by making high temp graphite components, earns enough to have a ratio to price (19.58) of 14.36.

And as long as you're content to look, or willing to trade on foreign markets, Toray (3402 JAP) and Unidym (not-publically traded) are interesting.

No, I haven't bought yet, not sure I will. I am planning to watch a few for a while .

A high P/E means a lot of investors have high expectations , this reduces the potential for a large payback somewhat , but if a product has a bright future won't a high P/E naturally occur?

With the type of exposure (carbon fiber) being equal and the quantity of exposure (as might be indicated by market cap 2.15B>908.78M) being less, why would you invest in Zoltek over Hexcel? Hexcel is still too high of a P/E for me, while natural gas producers are experiencing the traditional May sell-off even while energy prices tighten, but HXL seems like a better value exposed to the same growth market as ZOLT.

All right ,one apparently does get more company for your dollar buying HXL.
May first
http://finance.google.com/finance?q=Hexcel+&meta=hl%3Den
Mkt Cap:  2.17B     P/E:30.15
52Wk High:  27.91
52Wk Low:  17.00

http://finance.google.com/finance?q=Zoltek&meta=hl%3Den
Mkt Cap:  920.31M   P/E 147
52Wk High:  51.77
52Wk Low:  20.36

[Plane]

--------------------------------------------------------
By the way this is an example of the anthropic principle , which you seem to understand already.

It is?  I do?

Can you elaborate on this?

http://www.anthropic-principle.com/

How big is the smallest fish in the pond? You catch one hundred fishes, all of which are greater than six inches. Does this evidence support the hypothesis that no fish in the pond is much less than six inches long? Not if your net can?t catch smaller fish.
Knowledge about limitations of your data collection process affects what inferences you can draw from the data.

Or to take yet another example, suppose you?re a young investor pondering whether to invest your retirement savings in bonds or equity. You are vaguely aware of some studies showing that over sufficiently lengthy periods of time, stocks have, in the past, substantially outperformed bonds (an observation which is often referred to as the ?equity premium puzzle?). So you are tempted to put your money into equity. You might want to consider, though, that a selection effect might be at least partly responsible for the apparent superiority of stocks. While it is true that most of the readily available data does favor stocks, this data is mainly from the American and British stock exchanges, which both have continuous records of trading dating back over a century. But is it an accident that the best data comes from these exchanges? Both America and Britain have benefited during this period from stable political systems and steady economic growth. Other countries have not been so lucky. Wars, revolutions, and currency collapses have at times obliterated entire stock exchanges, which is precisely why continuous trading records are not available elsewhere. By looking at only the two greatest success stories, one would risk overestimating the historical performance of stocks. A careful investor would be wise to factor in this consideration when designing her portfolio. (For one recent study that attempts to estimate this survivorship bias by excavating and patching together the fragmentary records from other exchanges, see (Jorion and Goetzmann 2000); for some theory on survivorship biases, see (Brown 1995).)

In these three examples, a selection effect is introduced by the fact that the instrument you use to collect data (a fishing net, a mail survey, preserved trading records) samples only from a proper subset of the target domain. Analogously, there are selection effects that arise not from the limitations of some measuring device but from the fact that all observations require the existence of an appropriately positioned observer.

[Xavier_Onassis]

Well, then if it means that "buying a stock will always be a crapshoot, but we still can accumulate the best data possible to eliminate the really bad decisions.

For example, investing in 100 shares of GE might be a really bad decision. But the odds say that I would be quite likely to enjoy a decent return if I hold this stock long enough. If I compare this to buying the same dollar amount in Powerball tickets, the GE decision is certainly the wisest. It is POSSIBLE that it is not the best decision, but in investing LIKELY trumps POSSIBLY.

[Plane]

Well, then if it means that "buying a stock will always be a crapshoot, but we still can accumulate the best data possible to eliminate the really bad decisions.

For example, investing in 100 shares of GE might be a really bad decision. But the odds say that I would be quite likely to enjoy a decent return if I hold this stock long enough. If I compare this to buying the same dollar amount in Powerball tickets, the GE decision is certainly the wisest. It is POSSIBLE that it is not the best decision, but in investing LIKELY trumps POSSIBLY.

It is really about the limits of information gathering , as you point out failure fails to report itself , this is one of the principals .