THE GHOST TRAIN
FINANCE GHOST: Listen to the market
On both long and short positions, look at where the multiple has historically traded and why
02 May 2024 - 05:00
When it comes to single stocks, it’s important to assess where your returns will come from. Past returns are, at best, only an indication of how things might turn out. If you don’t do the detailed work on the prospects vs the track record, as well as the valuation, you’re looking for trouble. Ignoring what the market has previously told you about a company is equally dangerous.
The share price return is a function of two things: growth in earnings per share and changes in the valuation multiple. The former is based on management’s efforts and the latter on the market’s response to those efforts...
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