Trader Mike

Somebody at CNBC has decided to hype the fact that Apple’s (AAPL) $8.81 drop today is the worst one-day decline since autumn 2000. I guess that’s true if you’re looking at points but I’d argue that you should look at percentages. Alternatively, one could look at market cap. Based on that measure they certainly did lose a lot of capitalization today — about $7 billion. But even using market cap isn’t really a fair comparison since Apple Inc. is so much bigger than it’s ever been. Most normal fluctuations these days are going to be bigger moves than in years past.

For my money, I’ll stick with doing percentage based comparisons. As I’ve …

“SkyGuy” left this comment on my post about high-priced stocks:

I disagree about low-priced stocks! $5 stocks have the highest profit potential of any stock out there. The reason is that this price level is where small companies make the jump to big companies. It’s the best part of the growth curve in terms of revenue and profit acceleration.

If Google brings in $4 bil of revenues this year, how much longer can it continue to double its revenues? Not much. OTOH, a small restaurant chain with a $4 stock with 30 stores can easily double rev’s by franchising another 30 stores.

There are 40 stocks in the $1.50 to $7 range that have outperformed Google this year.

This comment is a …

I’m always amazed at how often I hear people say that they can’t afford “expensive” stocks. When they say “expensive” they really mean high-priced, as in price per share as opposed to truly expensive based on P/E ratio or some other valuation metric. So these same people would be all over the stock if they simply split the stock so that the price per share was lower. That logic befuddles me because it’s still the same stock with the same valuation. I guess the same people that go nuts over stock splits also are thrilled when they break a $100 bill into five 20s.

The way I see it, if you can afford to buy one share …

Looks like Gordon Gekko beat me to the punch. A comment that was left the other day sparked me to write about a pet peeve of mine — people focusing on stock price & number of shares (smoke & mirrors) instead of dollars & percentages (the true equalizer). I’m still gonna write that article but in the mean time check out what Gekko wrote on his blog: ” The Myth of a Stock Price”

Update: Tom left the following in the comments. He did a great job of explaining why people tend to focus on lower priced stocks and why they should change their thinking:

Hi Mike,

When I first started trading with a small …

I just read a post at Funiveristy entitled “Nova’s Laws Of Money: Money Is A Thought“. It’s about the fact that money is just an idea.

How can somebody pay $50,000 or $100,000 or $250,000 or even more for a Patek Philippe watch while you can get a good value watch for $100 or $200? Because the company behind the Patek Philippe watches instilled this thought into some people in the world, to whom money is just an idea, that that is what they are worth.

It reminds me of people who think that there are ’safe’ stocks. Like my man Jesse Livermore once said “they’re all worthless!” Any stock’s/company’s valuation is just based on perception …

The Big Picture highlights what Mark Cuban has to say about how stocks are valued. (Cuban’s entire statement is here ) Mark is absolutely right that supply and demand, and the mood of the crowd (psychology) matter much more than all that fundamental mumbo jumbo. Especially in the short term.