Sunday 25 December 2011

What do you need to beat the market? Higher mathematical expectancy


What do you need to beat the market?  


You need to pick stocks of companies that have a higher mathematical expectancy than that of the market, example, the S&P 500. 

Of course, this could come in many forms, for example:
- a higher earnings yield (low PE), 
better growth prospects (high EPS growth rate), 
higher certainty in the company’s future prospects (good quality business and management), or 
- a cheaper stock price in relation to the business’s underlying assets (undervalued stock).  

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