This chapter introduced you to some of the basics of common stock valuation and fundamental analysis. It focused on three important tools used by stock analysts in the real world to assess whether a particular stock is "rich" or "cheap": dividend discount models, residual income models, and price ratio analysis. How should you, as an investor or investment manager, put this information to use?

      The answer is that you need to pick some stocks and get to work! As we discussed in the chapter, experience and judgment are needed to use these models, and the only way to obtain these is through practice. Try to identify a few stocks that look cheap and buy them in a simulated brokerage account such as Stock-Trak. At the same time, find a few that look rich and short them. Start studying P/E ratios. Scan The Wall Street Journal (or a similar source of market information) and look at the range of P/Es. What's a low P/E? What's a high one? Do they really correspond to what you would call growth and value stocks?

      The Internet is a copious source for information on valuing companies. Try, for example, Stock Sheet (www.stocksheet.com), MarketWatch (), Hoovers Online (www.hoovers.com), and Zacks (www.zacks.com). Don't forget to check out the Motley Fool (www.fool.com).

      Several trade associations have informative Web sites that can be helpful. For individual investors there is the American Association of Individual Investors (www.aaii.com) and for professional security analysts there is the New York Society of Security Analysts (www.nyssa.org). The Association for Investment Management and Research (www.aimr.com) provides a financial analyst's certification that is highly respected among security analysts.