Interesting insight from a CFA Institute podcast on why expensive - TopicsExpress



          

Interesting insight from a CFA Institute podcast on why expensive stocks tend to undeperform: When a companys stock gets expensive, the company tends to make riskier decisions. If its P/E ratio is 20, its only earning 5% on its market capitalization because analysts are predicting that its earnings will rise enough over the next few years to justify a low earnings yield today. Either the company makes riskier-than-normal decisions in order to get those expected earnings increases, or it makes safer decisions that will not lead to high earnings increases - and watches its stock plunge as a result. ... cfawebcasts.org/pages/index.aspx
Posted on: Fri, 04 Jul 2014 21:43:25 +0000

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