Similarities between Poker and Investing

[zerosum]

adios,

I agree. It always comes down to your assessment of fair value relative to that assigned by the market.

The search for favorable odds happens when you calculate your perception of fair value. The process inherently requires estimates such as earnings and growth prospects, reasonable risk premium estimates for discount rates, consideration of competiton for the company's products, consideration of the company's industry, viability of product lines, current market penetration realtive to the industry and the estimate of the penetration possible for the industry itself, . . . . You get the pictue; the list of consideratons is very significant and not limited to this brief outline.

When you assign values to the considerations important to your calculation of fair value, you have, whether acknowledged or not, also assigned probability estimates regarding their likely occurrence. The accuracy of your estimates and the accuracy of your probability assignments form the basis of your ability to search for and find favorable odds.