Although I’m going to use the specifics of Apple to discuss some investing specifics, my intent is that you’ll see the broad contours of how I evaluate investor psychology and the growth potential of mega-caps that operate in nearly every country and have cumulative revenues in the billions of dollars.
Number One: The margin of safety principle really works. Does BHP Billiton have business results that merit it beating the S&P 500 from 20% to 2% since April 7, 2016? No. It’s just that the expectations got so low that reversion to the mean was inevitable. Does Conoco’s business performance suggest that it ought to be up 40% compared to the S&P 500’s 13% gain since February 10th, 2016? No. But while the dividend was being cut, the expectations for Conoco got so low that reversion to the mean was bound to propel it upward.