Relying strictly on historical stock prices as a predictor of the future is a major investment mistake.

Now before I hear from hundreds of chart readers, let me state unequivocally that I stand with the Benjamin Graham/Warren Buffett camp in believing that the historical price trend of a stock is merely an indication of the market's like or dislike of a company's performance at a particular point in time. Furthermore, the market's stance is often more emotional that logical.

However, over time the performance of a company's shares will reflect its financial performance. Unfortunately, too many investors -- both on and off Wall Street, professional and amateur alike -- are wedded to using a rearview mirror aimed at share prices and market performance as their primary investment tool. That is wrong. It is a company's fundamentals going forward that will determine its value in the long run.

While that is heartening prose, based on the mail I receive many of you at one time or another find yourselves losing faith in an investment due to the market's judgment process, which has been volatile of late to say the least. Yes, the resulting uncertainty can be frightening. However, you need to remember that investing is not about how the markets performed yesterday, or how they are going to perform tomorrow. Market direction in the short-term is always unpredictable, while a company's prior accomplishments are ascertainable with complete certainty.

From there, the problem becomes relatively straightforward. You simply need to find those corporations with winning records of accomplishment that sell products you understand.

For example, unless you are new to the planet, you have probably shopped in a Wal-Mart. Each month Wal-Mart updates you on what sold and what did not, the reasons why and the net result on sales revenue. At the end of each quarter, overall sales are either up or down, as are profits for the quarter.

No shenanigans there, so now the only step left is for you to judge for yourself as to whether rising numbers of people will purchase ever-increasing dollar amounts of products from Wal-Mart. If you believe the answer is yes, then you know what to do next.

Here is a more difficult example because the name NVIDIA (Ticker: NVDA) may not jump out at you. Nonetheless, the company is the worldwide leader in the manufacture of graphics chips used by major PC makers, such as Acer, Apple, Dell, Gateway and Hewlett-Packard. The company also provides its products to companies such as Sony for its PlayStation 3 and to cell phone manufacturers. So now ask yourself, what is the future for those kinds of products?

The other part of the analysis is looking at NVIDIA's past financial performance, not its share price performance, as an indicator for what the future might hold. For the second quarter of fiscal 2008, revenue increased to a record $935.3 million, up from $687.5 million a year ago. Net income was a record $172.7 million, or 43 cents per share (pre-split), an increase of 99 percent vs. the second quarter of fiscal 2007.

The company's gross margin hit a record 45.3 percent and the company recently announced a 3-for-2 stock split that was distributed on Sept. 10.

Intrinsic value should always be a part of your financial analysis. In the case of NVIDIA, a discounted earnings approach, with a discount rate of 11 percent and an earnings growth rate of only 18 percent (company's average is closer to 38), yields an intrinsic value of $74 per share. The more conservative discounted cash flow to the firm approach provides an intrinsic value of $44 per share.

My earnings estimate for fiscal year 2008 is $1.40 per share post split, with a 12-month target price for the shares of $49 for a gain of 48 percent over the current price of $33.22. Now the rest is up to you.