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Frequently Asked Questions

Market Lab Report
My question is regarding stock selection and stock price. Do you ever consider a stock too expensive?

Q: My question is regarding stock selection and stock price. Do you ever consider a stock too expensive? For example, BIDU had a 10 for one stock split last year when it was trading around $700 a share. Now it is back up to $125 a share and looking strong with great fundamentals. Priceline recently issued a pocket pivot and breakout above a base on base pattern. It is trading around $455 a share and has outstanding fundamentals. I'm just curious your take on a stock like Priceline that is higher priced, yet still a leader with great fundamentals. Do you shy away from it just b/c of the high price?

 

A: "Expensive" is a term that has nothing to do with a stock's actual price. A stock is "expensive" if you buy it and it goes down a lot. Otherwise, just because a stock price is high it does not mean its expensive as it may very well go higher. You are injecting "consumer logic" into an investment decision, which is wrong. You are not a consumer of stocks, looking at a low price as "cheap" and a high price as "expensive," so don't fall victim to that kind of "logic." It doesn't apply.


Published: Feb 10 2011