The Value Trap: Cheap And Expensive Stocks

Tue, 03/20/2012 - 15:48 EDT - Seeking Alpha

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Top Economic Articles:
Apple's stock is flirting with $600, and has a market valuation higher than that of Exxon (XOM). Priceline.com (PCLN) is flirting with $700. Micron Technology (MU) and Advanced Micro Devices (AMD) are trading below $10. Which stock is cheap, and which is expensive? Should investors care about the absolute price of a stock and its market valuation?Valuing stocks is a tricky business, especially when emotions replace reason in investing. Some investors focus on accounting variables like Earnings Before Interest Depreciation and Amortization (EBIDA), and on the absolute price of the product. Stocks that usually trade above $100 are considered "expensive," while stocks trading below $10 are considered "cheap." According to this method, the stocks of companies Apple (AAPL), Intuitive Surgical (ISRG), Google (GOOG) and Terra Nitrogen (TNH) are "expensive," while the stock of Advanced Micro Devices, and Micron Technologies are "cheap."

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The Value Trap: Cheap And Expensive Stocks

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