Value

You may wonder what the difference is between points #1 and #2 of the indications that I mentioned yesterday.

I would try to explain with the analogy of Andre Kostolany:

The intrinsic value of a company is the master, and the price of the share is the dog - the latter wanders around the former. Although the dog may sometimes be naughty and runs far ahead - or much behind - the master, in the long run, it is the man who leads the way.

Now, when we analyse and buy a stock, here are our assumptions:

• For type 1 value investors, he could tell where the master is at the moment.
• For type 2 value investors, he could tell where the master is going in the future.
• For speculators, (he believes) he could tell where the dog is going.

(The last scenario is certainly impossible, unless you are beast of a kind yourself.)

To me, it is definitely more easy to tell where someone is than to guess where he is going - although the latter task is not altogether impossible. My personal prejudice is, however, not to tell both at the same time. By the Principle of Uncertainty in quantum mechanics, no one could have an accurate judgement simultaneously on both the position and velocity of any particle (although I'm not sure if the analogy is right).