I know that there are many gaps in my knowledge, and those gaps are as wide as they come, but I am not too sure, if one can invest in a company for long term based on ratios, other than what are usually looked at to analyze a business.
I do acknowledge that there must be a lot of merit in creating and presenting such ratios or concepts, which sometimes could be beyond my current understanding, but from my limited knowledge and experience, what the market participants think of the business, who are very different groups, but arrive at the same conclusion of either moving the price up or down, play the bigger role. So while such ratios are intriguing, they may not work as anticipated and may test our patience. I don’t know if the line between a value buy and a value trap is thin.
I also acknowledge the fact and the beauty of purchasing something less than its value, and see it becoming profitable. The thought of looking at such opportunities cross my mind sometimes. Sales, profit, cash flows, dividends, all are in place, it is just the price that feels wrong.
And if I remember correctly, I did buy something, looking just at its ratios, and paid dearly. I think I read a comment along the lines of, numbers are past, or they reflect the business up to that point etc.
Just my thoughts, presenting my views for my own benefit and clarity. No intention to curb your enthusiasm, I am enthusiastic myself. We can create our processes and philosophies from many varying sources, different schools of thought and multiple disciplines.
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