Figuring out the right price to pay for a stock
Valuation is also about the performance of the business, especially if you are investing for dividends and growth
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WHEN your stock falls by 50 per cent, it needs to gain 100 per cent to break even. That’s just mathematics.
But if you have been in the stock market long enough, you will know that huge declines are largely unavoidable. They are part and parcel of investing.
Here’s the thing: When a stock halves in value, most investors will assume they have made a mistake or overpaid for the stock. Yet, as you will see, it is not always the case.
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