Friday, 23 October 2009

A rally from extreme cheapness to excellent value

So what happens next? If that was a rally from extreme cheapness, what does the market do when it is merely excellent value?

Overpriced = price at more than 120% of Intrinsic Value

Fair price = price at more than 80% but less than 120% of Intrinsic Value

Bargains = price at less than 80% of Intrinsic Value


Extremely overpriced = more than 50% above intrinsic value
Overpriced = more than 20% above intrinsic value

Fair price:

Fair value = +/- 20% of intrinsic value


Good value = 20% lower than intrinsic value
Excellent value = 30% lower than intrinsic value
Extreme cheapness = 50% lower than intrinsic value

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