How To Find Success, Wealth, and Good Fortune In The Stock Market

If you follow the Fama-French models or read the work of people like Larry Swedroe who espouse something called “the efficient market hypothesis”, you may think that it is dumb to invest in individual individual stocks because everything is already “priced into the market.”

This kind of logic is wrong, and I will tell you why: the value of any individual stock is always going to be determined by the amount of cash that it generates in the future, discounted back to the present. Of course, there are other factors that feed into this—What does the company’s balance sheet look like? What is the earnings quality/economic moat of the company? What is the probability that you can predict future profits—is this something with stable earnings like General Mills or wildly fluctuating performance like Sirius radio stock?

Since we do not know what the future will bring, we can never definitely … Read the rest of this article!