How To Value Stock Prices


Well 2012 is now in the record books and we went through quite a bit from January 13th when rating agencies downgraded nine euro-zone nations, to the failed IPO and falling stock prices of Facebook in May, then Hurricane Sandy in October and ending the year with the fear of falling off the Fiscal Cliff. Much of this kept investors on the sidelines either waiting for a big pull back to buy into the market or many simply frozen in fear like a deer in the headlights. For many years, I have tried to explain that fear is your greatest enemy when it comes to investing in the financial markets today.  Your only resolution to know is that fear will be there, but can easily be overcome by professional investment research and understanding the true valuations of the businesses that you invest in and if you can’t overcome that or don’t have time to do the real research, find a money manager who does what I do, and turn the reins over to me or them.

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I know this is not easy for people because fear is a much greater emotion then joy is. So when you’re scared of your investment decisions, you are probably twice as scared as you would be being happy. Think about 2012, there were a lot of things to feel bad about, but it was hard to think of something correspondingly good. So when you watch all the news and you watch the stock prices like a hawk, you become scared and react more negatively to the news and either sell or again remain on the sidelines by putting your money in money market accounts, CD’s or other “safe” instruments that prevent you from earning any type of real return on your investment.

2012 the S&P 500 returned 13.4%, the NASDAQ climbed 17.45% and the Dow managed to increase 9.2%. Be honest with yourself, did you really think we would have those kinds of returns in the financial markets in January 2012, if your honest with yourself I think most will say no. 2013 will hold a whole new bag of things to worry about, some we know of like the debt ceiling, others will be sprung upon us and raise the emotions to levels that once again scare you. Please notice how I put you and not us or me, because while I will be aware of the same things you are… I look at things from a different prospective. Yes I understand on the short term it may cause the stock prices to decline on some of my companies we hold in our portfolio, but I also understand that the businesses we hold in our portfolio are currently undervalued and the company’s products will still be purchased tomorrow whether it is a tooth brush or an IPhone.

Just because the Dow is over 13,000 doesn’t make it expensive, you must break that down into the fundamentals of what the earnings are, the sales, book value and cash flow for each company. Then and only then can one determine the value of each and every company. Currently I’m buying companies in our portfolio for eight to ten times forward earnings…By anyone’s standards, those are good buys.

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I’m looking forward to 2013 and while we just started the year I don’t care about what happens tomorrow, next week or next month to stock prices, I’m am now focused on where our $115 million portfolio will be when December 31 2013 arrives. If you need me, I think you know how to find me.

Brent Wilsey, Your Money Maker

Wilsey Asset Management

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Jacqueline Maddison is the Founder and Editor-in-Chief of Beverly Hills Magazine. She believes in shining light on the best of the best in life. She welcomes you into the world of the rich and famous with the ultimate luxury lifestyle.
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