AE - The imperfect model with illogic AE: My long positions are normally in stocks like YLO that trade at $8 but worth $25 the difference is the companies I invest in are companies I like with long term futures.
However here is my 4 requirements for a stock
1) Long term economic benefits 2) The company's stock is deeply undervalued 3) The company's management and information is clear and there is goal congruence 4) Understanding of the company's business.
YLO missed out on 1 and 2 which are not sure. Therefore it would never be a big position in my portfolio. It was interesting given the financial numbers to what it was trading at and I still think it will get there.
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More poor logic, in this case, the fallacy called "Petitio principii" (begging the question)
The GOAL of the exercise is to estimate a fair price for Y.
Number 2) of your 4 requirements is the GOAL, whether the stock price is currently undervalued or overvalued. You cannot use 2) to calculate 2).
In order to arrive at 2), you must first have accurate determinations of 1), 3), and 4)
AND, since you state the obvious, that 1) Long term economic benefits, cannot be accurately determined, then your estimate of 2 likewise cannot be accurately determined.
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A fish out of water cannot bluff the fisherman, and you are definitley a fish out of water