Are Nestle shares finally within the reach of small investors?
railway stocks, Nestle's trending status on the internet caught me off guard. On closer look, it turned out the Maggi manufacturer had just implemented a 1:10 stock split, with Friday marking its first ex-split trading day. This development made India's sixth most expensive stock 90% more affordable, attracting investors previously deterred by its lofty price.
However, it's crucial to remember that a stock split, which increases share quantity and liquidity but doesn't affect a company's long-term fundamentals, shouldn't be the sole basis for trading decisions. Investing should be grounded in long-term fundamentals and intrinsic value, not merely on whether a stock has split. Those eyeing Nestle post-split, lured by its lower price, might not be adopting the best investment approach, in my opinion.
It's important to distinguish between price and value - the latter should be the primary focus. In this context, determining a fair entry price for Nestle is essential. A useful strategy is to identify a price below which a stock is considered an investment and above which it veers into speculation.
Many successful investors excel at this differentiation, maintaining a clear divide between investment and speculation, and reaping significant rewards by staying within the investment domain. Most people, however, struggle to differentiate and control their investment behaviour, often veering into speculation. So, how do we distinguish between investment and speculation? Walter Schloss, a highly successful yet under-the-radar investor and a friend of Warren Buffett, believed in buying stocks below their book value.
Read more on livemint.com
