Gems & Undervalued. (besides weliweriya of course!)
What is the definition of a Gem ? what are the parametres it should have to be classified as a gem ? can we measure it by some figures such as eps, nav, dividend yield, free float, revenue growth, market share etc ? what about subjective criteria such as ownership structure, management, industry fundamentals ?
can we come up with a formula to decide whether a share is a gem ?
Then, we hear the term "Undervalued" (& Overvalued). how do we know and decide the real value ? is it based on the market p/e ? why are certain shares "popular" & "moving" such as CTC, NEST etc trading at 30-40 p/e ?. why are some shares 4-5 p/e but not moving ? are they undervalued and if so, why are they not moving ? Just bcos a company gives a high nominal dividend (low dividend yield), does that make the share attractive, undervalued & popular. Why is JKH so popular ? p/e 18 times, dividend yield 1-2 %, multiple times Book value. Is JKH a Gem ?
Does a company have to be undervalued to be Gem ? even diamonds are not cheap no ?
Or are Gems & Valuations differing in the eyes of investors and only when their is a consensus, event or trigger (or a bull market !) will the share price take off ?
Can a Diamond to some appear as Quartz to others ?
Food for thought on a gusty sunday in colombo !