Lessons from the FACEBOOK IPO. Be Wary of IPOs. It's Probably Overpriced.

Do you think you can make lots of money by getting in on the ground floor of the initial public offering (IPO) of a company just coming to market? My advice is: that you should not buy IPOs at their initial offering price and  that you should never buy an IPO just after it begins trading at prices that are generally higher than the IPO price.   Historically IPOs have been a bad deal.  In measuring all IPOs five years after their...

Five key questions in considering investment opportunities:

1.  Is this a good business run by smart people?This may include items such as quality of earnings, product lines, market sizes, management teams, and the sustainability of competitive positioning within the industry.2.  What is this company worth?Value investors perform fair value assessments that allow them to establish a range of prices that would determine the fair value of the...

Nervous UK investors make a dash for cash

Thousands of nervous investors are shunning shares as the financial crisis drags on. Investors opting for the safety of cash amid the economic debt crisis Photo: Howard McWilliamBy Emma Wall8:03AM BST 24 Jun 2012British investors are making a dash for cash as the eurozone turmoil shows no sign of abating. Stockbrokers, fund providers and investment managers all say that investors with Sipps...

The pros and high frequency traders rule the world. Is the Buy & Hold Stock Strategy Officially Dead?

If you hold onto an investment for longer than five days, consider yourself the new millennium’s version of Benjamin Graham.Source: Reed Business Information, Inc.Benjamin Graham, the economist often considered the father of value investing.The average holding period for the S&P 500 SPDR (SPY), the ETF which tracks the benchmark for U.S. stocks, is less than five days, according to shocking...

How exactly do we know the value of the asset? Trust Your Instincts (Common Sense).

"Price is what you pay. Value is what you get."Leave it to Warren Buffett to sum up the dilemma in a single pithy dichotomy. The world's greatest investor reminds us that the value of an asset -- whether a car, a house, or a stock -- does not necessarily have any relation to the price we pay to own it.   Buffett's observation still leaves us with one crucial question: How exactly do we know the value of the asset?Benjamin...

There is no price low enough to make a poor quality company a good investment.

If you're in doubt about the quality of a company as an investment, abandon the study and look for another candidate.When in doubt, throw it out.Abandon your study and go on to another.  There is no price low enough to make a poor quality company a good investment.The worse a company performs, the better value its stock will appear to be.Because declining fundamentals will prompt a company's shareholders to sell, the price will decline.  This...

Telltale signs of good cash generation are dividends, share buybacks, and an accumulation of cash on the balance sheet.

Economies of scale:  refers to a company's ability to leverage its fixed cost infrastructure across more and more clients. Operating leverage:  The result of economies of scale should be operating leverage, whereby profits are able to grow faster than sales.Low ongoing capital investment to maintain their systems: The combination of operating leverage and low ongoing capital requirements suggests that the firms should have plenty of free...