The impact of market fluctuations upon the investor's true situations may be considered also from the standpoint of the shareholder as the part owner of various businesses . The holder of marketable shares actually has a double status , and with it the privilege of taking advantage of either at his choice .
On the one hand his position is analogous to that of a minority shareholder or silent partner in a private business . Here his result are entirely dependent on the profits of the enterprise or on a change in the underlying value of its assets . He would usually determine the value of such a private-business interest by calculating his share of the net worth as shown in the most recent balance sheet .
On other hand , the common-stock investor holds a piece of paper , an engraved stock certificate , which can be sold in a matter of minutes at a price which varies from moment to moment - when the market is open , that is - and often is far removed from the balance sheet value .
The whole structure of stock market quotations contains a built in contradiction . The better a company's record and prospects , the less relationship the price of its share will have to their book value . But the greater the premium above book value , the less certain the basis of determining its intrinsic value i.e. the more this " value " will depend on the changing moods and measurements of the stock market .
Thus we reach that the more successful the company , the greater are likely to be the fluctuations in the price of its shares . This really means that , in a very real sense , the better the quality of a common stock , the more speculative it is likely to be at least as compared with the unspectacular middle grade issues .
0 comments:
Post a Comment