Business Discussion Talking Deal Concept

Waiting for the world to change

If you want the value of a company to go up or down, you need something to change. If everything was to remain the same, then the value of the company should not change.

Think of the local corner store. Let’s say one day you buy it for $1 million. 3 months later, you decide that you don’t like owning a corner store and you look to sell it. Would you be able to sell it for around $1 million, less than or more than what you paid?

ANSWER: Most likely you’d get around $1 million for the corner store if nothing has significantly changed.

Let’s look the same scenario where you buy the local corner store for $1 million dollars. This time in between the time you buy the corner store and the 3 months that you go to sell the corner store, there’s news that a new 300 unit apartment block will go up next door and be completed and ready for residents to move in over the next 2 months. Now would you be able to sell that corner store for more than, around or less than $1 million?

ANSWER: A huge apartment block like that is likely to significantly boost business and sales. Hence you are likely to be able to get significantly more than $1 million for the business if everything else remains the same.

When it comes to the value of your shares, it’s the same thing… something needs to change in order to create or destroy the value of the business.

When investing, I’m often looking for positive catalysts to help my share price to change and move upwards. Often that can be riding structural waves of change or that catalyst could be new management, new strategy, new product or better sentiment.

If nothing changed, then the value of a business shouldn’t change, and the share price shouldn’t either. As an investor look for change and use it to try and find positively moving share prices.

Have you ever made an investment into a solid, good company, only to have the share price remain static for a number of years? Or seen a company announce a record profit, only to watch the shares fall? Or held a terrible company, only to see the share price rocket higher? What is it that moves share prices? The answer to that question is change. A change that either shifts the value of the company upwards or down.

May you see lots of positive catalysts and change that move the value of your investments onwards and upwards.

Happy investing!

Julia Lee
Portfolio Manager
© Burman Invest

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