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Review the topic of "firm foundation" approaches to valuing stocks. Which approach(es) are the most reasonable...

Review the topic of "firm foundation" approaches to valuing stocks. Which approach(es) are the most reasonable from your perspective, and why?

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Answer #1

Firm foundation theory believes in investing into assets through related comparison with intrinsic value and market price of the share.

this philosophy advocates more of value investing which would reflect that when intrinsic value of an asset is lower than the current market value of the Asset, and investor would always invest into the share, and when the fair market value is reflected, the investor would gain.

this philosophy also advocates that when the share is overvalued and when the intrinsic value is lower than what the share is being traded in the market, then an investor must sell the shares in order to gain from his potential loss.

Most reasonable lessons would be to buy any undervalued stock and always sell the overvalued stock and always diversify the risk to maximize the return.

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