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One can (and should!) argue that their great growth prospects are baked into their stock prices already.
by mathattack 10y ago
One can (and should!) argue that their great growth prospects are baked into their stock prices already.
- loqwe 10y agoThen why do the prices keep going up?
- mathattack 10y agoHindsight bias. It's very easy to look at the 3 winners over a long time horizon and say, "Look, they keep on going up and up." If this were a real trading strategy, then Momentum would sustain itself over a longer time, but the empirical academic evidence is that it's short term. Over long time horizons, this tends to reverse itself. (Both companies and markets with unusually high PE ratios underperform low PEs over long time horizons) This is well accepted in finance. [0] [1] [0] https://www.fidelity.com/learning-center/trading-investing/trading/value-investing-vs-growth-investing https://www.fidelity.com/learning-center/trading-investing/t... [1] https://faculty.fuqua.duke.edu/~charvey/Teaching/IntesaBci_2001/FF_Value_versus.pdf https://faculty.fuqua.duke.edu/~charvey/Teaching/IntesaBci_2...