Earnings Drive Businesses, But Expectations Drive Stock Prices
by Brian Luster
Bet on the favorites and you may cash in a couple of small winning tickets; but scope out an underdog the crowd doesnt believe can win and you collect a big payoff. There simply isnt much reward in betting with the consensus.
In this article
- Good Companies
- Good Investments
- Divergent Opinion Rules
- A Different Kind of Risk
- Calculating Implied Expectations
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The same holds true in the investing universe. To be consistently successful, you must adopt a contrarians mentality and bet against the crowd. There are a host of good businesses out thereeven a lot of great businessesyou might invest in, but if you want substantial returns, you have to place less emphasis on the prospects for the business, and more on the prospects for the investment.
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