But now those smart Wall Street types say stocks may be fully valued. That’s their CNBC - a division of General Electric (GE) - obtuse talking heads’ way of basically telling us stocks are overpriced and could stall out or drop. 

Sure, some stocks have gone up 50% and some have even doubled in price (none that I owned; someone else got rich off those). But there is more to a stock than appreciation or dividends. Many of those smart Wall Street types fail to take a third valuation concept into account when they run their sophisticated company valuation models, formulate forward-looking technical analysis, or use tarot cards.

This third valuation element may not be covered in those three-pound financial analysis books. It may not be something the hotshots at J.P. Morgan (JPM) even have on their radar. And that is precisely the reason why it’s my job to bring this to your attention. 

The third element for valuing stocks may be just the thing that could lift the markets even higher and potentially help companies out of this recession.

Shouldn’t you demand more
from your stocks?

Did you get your Starbucks
shareholder gift bag?

Smart people might think these stocks are fully valued with little hope of appreciating much over the next quarter like they did over the last few months. They may be right. But you didn’t stop in here for a highly technical article on stock analysis. Nope; you know better than to expect anything remotely highly or technical from me.

I look deeper. Below the surface. I dig in for the real facts no one else can find. That’s what a hard-nosed journalist does.

If you are a typical investor, you probably use things like broker recommendations, fancy-schmancy charts, past stock movements, or your Uncle Stan’s tip-o-meter to determine if stocks are fairly valued. In fact, that is one way investors make money off stocks.  They buy stocks now at a lower price; then, at a later date, another investor thinks the stock is undervalued so he is willing to pay a higher price for it. That’s called, “finding the greater fool.” I wish these greater fools were in the phone book.

Another way to make money off stocks is when a company pays a few pennies per share in dividends. I guess that’s where all the pennies in that cup next to the 7-Eleven cash registers came from.

Stocks like E*TRADE Financial (ETFC), Level 3 Communications (LVLT) and Human Genome Sciences (HGSI) don’t pay dividends, but all these stocks more than doubled over the last few months.

This third stock valuation component seems a little odd at first, but when you stop to consider that it is so important, someone as respected as Warren Buffet -- the Grand Poohbah of investors and fearless leader of Berkshire Hathaway (BRK.A) -- places a huge value on this all- important element, you will realize everything you know about stocks may be wrong.

When you buy a stock, you expect to see a few things every year. You expect an annual report. You expect quarterly updates. You expect the Board of Directors to be made up of the Chairman’s golf buddies. You expect all kinds of excuses for things called non-recurring expenses, bad debt write-offs, and multiple back-dated option grants.

But one thing you don’t expect, and should definitely be factored into the overall value you place on the stocks you own, are the investor perks.

Prominent bank chairman when asked this
question at the company’s annual meeting,
“Where are the donuts?”

Warren Buffet supplies the entertainment at the
Berkshire Hathaway annual meeting

If you are on a strict diet, you could go for the non-food goodie bags handed out to shareowners of Occidental Petroleum (OXY) and Johnson & Johnson (JNJ). Years ago, if you attended the Ben & Jerry's annual meeting, you would be in the middle of a free music festival. There was probably ice cream there, too, but forget about that since you are on that pesky diet. But just a taste won’t kill you.

What if you can’t make it to the company’s annual meeting? Then the CEO and his happy, well-paid and perked Board of Directors may gladly send those shareholder goodies to you by mail. Berkshire Hathaway might give you a discount on GEICO auto insurance. R.R. Donnelley (RRD) may mail you a smartly- bound book. AT&T (T) has sent shareholders ten minute phone cards stapled to their annual reports.  Big name food emporiums like McDonald's (MCD) and Starbucks (SBUX) send coupons for free French fries and coffee.