 BUY
ONE, GET ONE FREE!
 BUY
THREE PRODUCTS, GET THE THIRD
FREE!!
 TRIPLE
POINTS THIS WEEK-END ONLY!!!
 What’s
our favourite???
You would have paid
$1,000,000 last
month
This month, you
would pay
$900,000
… FOR THE SAME
CAR!
You would have paid
€100 last month
You would pay €80
this month
… FOR THE SAME
DRESS!
You would have paid
€40 last month
You would pay €20
now
… FOR THE SAME
STEAK!
A
new model coming out
 Last
season’s fashion
 Coming
up to sell-by date
 Too
little demand
 Too
much supply
 Use
of a loss leader to bring in customers
Of Course!!
Would you prefer to
buy at £1.95?
Would you prefer to
buy at £1.04?
When the stock was
“on sale” of
course!
Would you prefer to buy
at €17.26?
Would you prefer to buy
at €2.03?
When the stock was “on
sale” of course!
Would you prefer to buy
at $27.73?
Would you prefer to buy
at $12.08?
When the stock was “on
sale” of course!
Answer:
You are buying the same product for a lower
price
No – a company is dynamic, it’s always
changing.
The engine of a car won’t change over a year
The engine of a company certainly can…
It is IMPERATIVE not just to buy a stock
because it’s at a lower price, but because
it is at better value.
Oscar Wilde
Race ahead of them…
 How
can you tell if a stock is at good value
when the price falls?

Dividend Yield

Price/Earnings Ratio

Price/Cash Ratio
During the last class, you bought and sold
within minutes.
An investor buys and holds for the medium to
long tem (i.e. months or years rather than
minutes or days)
A.
To avoid HUGE transaction costs!
B.
To let the stock (i.e. the company) develop
ad increase in VALUE and hence increase in
PRICE!
 Lack
of awareness – they don’t know what
they are doing
 They
have unrealistic expectations
 They
neglect to take transaction costs into
account
 They
want faster money
Yes… for about 5% of traders
As happened in the last class, successful
traders simply take the money off
unsuccessful traders.
Ordinarily, the successful trader is the
professional institution since they get the
information first
 For
somebody with less time and knowledge,
you have a much better chance of doing well
as an investor, because new money IS being
created as the companies develop.
 If
you do choose the trader route, remember
the odds are stacked against you.
Speculating



Short Term Bets
Active Buying &
Selling
Uncertain basis for
buying and selling
Investing
 Medium to Long Term
 Investing on the Basis
of Company
Fundamentals –
Dividend Yield,
Price/Earnings Ratio
etc