04 Mar 2021
Post-covid market crash, 2020 was a crazy year in terms of stock growth - defying traditional views on how stocks grow. Do you think fundamentals still hold or are there new aspects to consider?
One example is Tesla, which analysts said will crash and only after roughly a year it dipped significantly over the past week. It also exceeded a lot of price valuations during that run.
Fundamentals will always matter. Eventually, intrinsic value (consisting of other intangibles like possible future growth & company economic goodwill) will catch up to the enterprise value of each company.
When people deploy assets into growth stocks, they expect the intrinsic value to multiply rapidly over the years to reach the enterprise value they are paying for.
In a market crash, the opposite is true, the enterprise value will instead chase the intrinsic value of the company and go down rapidly (what we have been observing these last 2 weeks).
Many people will also say that low interest rates are the reason why stock prices are inflated. Yet, we all know it is unrealistic for interest rates to be this low over a 10-30 year long term basis. So once again, unless you are a short-term investor, there is no much sense in following interest rates to invest.
Hope this helps!
I would think a companies fundamentals is still one of the most important things to look at at any given time. All the other aspects such as rising bond yields or another Covid 2.0 aren't really helpful in terms of how I see long-term investing.
What matters more is if the company can withstand and grow not just in good times, but in bad times as well. As long as the fundamental holds, just stay in the market and ride out the bumps.
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