Price

• There are many factors that could alter the company's stock price: the value of the company, dividends, investor perception or market conditions, for example. A company can be a really great company but easily be selling at a discount to the firm's value. For example, suppose a big investor has to liquidate a position in a stock because investors want their money back and he is closing his fund. That may hurt the stock's price. However, that selling is based on nothing related to the value of the company and may provide a good opportunity to buy shares in a good company at a cheap price.
  
  

Value

• The value of the company is always the present value of its future cash flows. However, since one investor's value calculation could be different than yours, that creates a marketplace. Factors that could alter the value of the company include new competitors, slowing industry, management and government restrictions. It is your job to judge the conditions of the company and figure out if there really are structural changes to the competitive position of the company or not.
  
  

Relationship

• On an aggregate level, the difference between the value of a company's stock and its stock price is minimal. However, there are always places to find stocks that are either being overvalued or undervalued by investors. Once you are able to find either, you can take advantage by either selling short an overvalued stock or buying an undervalued stock. Remember, it won't be easy to go against the tide, but your goal is to make money, not to make friends, and feel good about the decisions you are making.
  
  

Choosing Investments

• There is no right or wrong way of choosing investments until you see the final results. There are many professionals and amateurs who try and fail. One way you can start is by finding stocks that are trading at a large discount to fair value so you have upside to capitalize on. A stock trading at a 50 percent discount to fair value is more attractive than a stock trading at a 25 percent discount. A 50 percent discount leads to an upside of 100 percent while a 25 percent discount is only upside of 33 percent.