Stock Value Versus Stock Price

The Motley Fool's top analysts discuss stock price and stock value.

May 21, 2014 at 6:04PM

In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who asks: "What is a normal or decent price for buying and selling a stock? I'm new to this and need some advice from experienced Fools out there.”

One of the biggest challenges for new investors is learning to understand the difference between price and value. Just because a stock looks expensive in absolute dollars doesn’t mean it’s expensive in relation to its actual value. Jason uses Markel and Whole Foods as examples of stocks that look like they may be good values in relation to their earnings potential. Conversely, a stock that looks cheap in absolute dollars may actually be expensive in relation to its earnings potential. Brendan uses Groupon here as an example. So learning how stocks are valued using metrics including price-to-earnings, book value, and free cash flow can help investors determine which stocks look like the best opportunities today.

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors.

Brendan Mathews owns shares of Markel. Jason Moser owns shares of Markel and Whole Foods Market. The Motley Fool recommends and owns shares of Markel and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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