The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Value Investing

URL:  https://boards.fool.com/however-sometimes-many-investors-are-able-to-buy-26832387.aspx

Subject:  Re: Evaluating a Stock with a "Higher" Date:  7/21/2008  12:04 PM
Author:  ltpj Number:  3665 of 3816

However, sometimes many investors are able to buy Coke and Yum or something along those lines for as much as 25 times earnings. And the general consensus here is that these companies are some of the best to invest in.

How do you justify a purchase like this if the bond will earn more money?


Equities have several (dozen?) things that might make them more attractive to some investmentors than bonds at the same earnings yield.

1. If inflation rises my bond will suffer. But the company may be able to raise prices, thus preserving margins and real return to the equity.

2. The company may improve their operations and the fruits of that improvement will accrue to the equityholder while the bondholder gets the same old coupon.

3. I'm just starting out and I can't achieve a reasonable level of diversification buying bonds at $10K each.

4. This company's going to the moon! I expect this stock to double over the next 3-4 weeks and those poor bondholders get nothing but their measly 5.5% per annum. What dolts!

Regards,
Tom
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us