The Only Chart That Matters

Most stock analysts and many investors spend a lot of time looking at charts. They are looking for patterns and price movements, with odd names such as head and shoulders, cup and handle, and double Axel leading into a triple Salchow. OK, so the last one isn’t really a technical indicator, but you get the idea.

Technical analysis is all about charts. You’re looking for momentum or the right opportunity to buy or sell based on what has happened in the last 50 or 200 days. Who knows what will happen in the next 50 or 200 days?

Value investors don’t care about charts. They are more concerned about where they think the stock is going in the long term based on its fundamentals.

I’ll be honest. I do take a peek at the chart to see whether the price is near the low end of its 52 week range. Value investors like stocks that are undervalued, unloved, and provide you with a margin of safety. A stock price chart is but one indicator that a stock is undervalued. Of course you need to look at other numbers as well.

No one knows where a stock will be in a week, three months, a year, or five years. In the long run, the market will go up. As Buffett says, time is the friend of a great company and the enemy of a mediocre one.  

The only chart that matters is the one showing the stock market’s historic gains. It keeps going up and down, but mostly up.

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