Balancing high growth with value investing principles.
David's company is attracting acquisition interest, but he's unsure how to objectively value his stock holdings and make sound investment decisions amidst the excitement and potential windfall. His portfolio's concentration in RSUs, coupled with the allure of high-growth tech stocks, makes him vulnerable to overpaying and deviating from his long-term financial goals. He needs a disciplined approach to separate hype from true value.
By applying the Graham Number calculator to potential investment targets, David can determine a fair intrinsic value. Let's say David is considering investing $100,000 from a hypothetical acquisition payout into a specific publicly traded tech company. The calculator reveals a Graham Number of $75 per share, while the stock is trading at $120. This suggests the stock is significantly overvalued, prompting David to reconsider or seek further due diligence, potentially saving him from a costly mistake. He also will reassess current holdings using this methodology.
The Graham Number is calculated using earnings per share and book value per share, readily available metrics for most publicly traded companies. The tool streamlines this calculation, allowing for quick assessment and comparison.
$50,000 potential capital preservation by avoiding overvalued stock and informing better diversification decisions.
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