Tackle Today: Price Matters
March 23, 2022
«Deal or No Deal?»
Good Day Traders, Coach Greg Holmes here.
Wouldn’t it be nice to buy a stock and have it go up right away every time? This is every investor’s dream but this is not rooted in reality. The reality is that stock prices constantly go up and down and that just looking at the daily price is not going to give an accurate determination of whether it is a good deal or an expensive proposition. For us to determine that we need to look at the value of what we are buying.
Price is only one-half of the value. The famous Mr. Buffett said, “price is what you pay and value is what you get!”. To really understand value we need to look at the price we are paying for a stock and what we are getting in return. In addition to this, to really know if we are getting a bargain we need to look at other opportunities in the same marketplace. We can think about it this way if we are going out to buy a car are we going to only one car lot to get a price? That is not the wisest of moves. It is always smarter to shop and compare and this is so very true when it comes to acquiring securities. Buying a stock at a fair value can offset a lot of turbulence in the market place but more importantly, it can pay dividends long into the future, no pun intended.
If we keep in mind the adage of value is what you get for what you pay then we can ask ourselves if we buy this equity what can we get out of it? There are several ways to figure out what we get and the most obvious way is how much the business produces in the way of profits as we know that being a shareholder gives us a slice of that pie.
The best and easiest way to see what kind of profits a company is making is to look at the Price-to-Earnings Ratio (P/E Ratio). This ratio tells us how much we pay for one dollar of earnings, this is the simplest view of what we pay for what we get. We can use this to search the marketplace for the best deal. Moreover, we can decide from this whether it’s a deal or no deal.
The above metric is only one of many that we can use to find deals in the marketplace, If you want to better understand the other metrics we use then I suggest you join the newest trading lab here at Tackle Trading and that is the Fundamental Society where we talk all things fundamental including what good and great companies look like and how they keep things healthy in all economic conditions.
🛑 Upcoming Options 101 Webinar: Iron Condor for Beginners with Coach Tyler Craig | March 28th, 2022 at 8:30 PM EST on YouTube
Join Coach Tyler Craig as he teaches everything you need to know to get started with trading Iron Condors for monthly cash flow. As the architect of Tackle Trading’s Cash Flow Condors system, Tyler brings a wealth of knowledge on the topic and will break down this popular strategy in simple, easy-to-understand terms.
In this webinar you will learn:
✅ What is an Iron Condor
✅ How to Build an Iron Condor
✅ Why Iron Condors Make Money
✅ Best Practices for Trade Management
✅ The Ideal Stock to Use
Video of the Day: How To Build a Safe Iron Condor
Coaches Tim and Cody work their way through the Tackle Trading Options Spreadsheet and teach students how to build a proper and safe Iron Condor.
▶ You can find the Options Spreadsheet here.
Chart of the Day: $GME
The company sells new and pre-owned gaming platforms; accessories, such as controllers, gaming headsets, virtual reality products, and memory cards; new and pre-owned gaming software; and in-game digital currency, digital downloadable content, and full-game downloads. Today’s email is all about value and if we look at the P/E ratio of GME we will see a negative number or actually an N/A in the spot where the number should be, this means that this company doesn’t make any money and this is evidenced by all the earnings numbers being negative. If we are looking for value this is not likely to be the best place.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show Replay
If you missed last night’s episode where Coaches Frank Martin and Greg Holmes talked about Visual Playbook or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 PM EST
Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.
Trading Justice 468: Finding Value in the Stock Market
In this episode, Coaches Matt, Mark & Greg Holmes—Head Coach of the new Trading Lab Fundamental Society—discuss the latest market news in the market skyline before discussing three fundamental techniques in assessing the value of a company.
- P/E Ratio
- Book Value
- Free Cash Flow
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