Abstract
The valuation of common stock has been a subject of broad interest for more than a century. The reason is obvious. If you buy a stock that goes up, you can make profit, and if you can consistently select stocks that go up, you can become rich. There is an obvious approach to choosing stocks. It involves identifying stocks that are undervalued, and buying these stocks in the expectation that the other investors will eventually realize the inherent value in the situation, thus causing the stock prices to rise. Nothing could be simpler. Just identify stocks that are undervalued, buy them, and wait for the market to catch up. The only problem is that a lot of analysts and expert in that domain have been trying to devise methods of identifying undervalued stocks for many years. A large number of methods have been devised a lot of words have been written on the subject. This paper will summarize some of the approaches. None of them has proven foolproof, but fools have applied all of them over the years.
