There is a common misconception that a good company is always a good investment. But that sometimes isn’t the case. The reason for that comes down to the role that expectations play in investing. Companies with good fundamentals typically have high expectations built into their stock price, while companies with poor fundamentals typically have low expectations embedded in their price. But either way, the key for investors is identifying companies where there is a gap between expectations and reality. In this episode, we look at the importance of expectations in investing and how investors can look at this issue. We also look at some systematic ways to take advantage of the differences between expectations and reality.
We hope you enjoy the discussion.
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