A stock’s price doesn’t represent the value of the underlying company; it represents the perception of the value of the underlying company.

A bad earnings report doesn’t change the fundamentals of a business overnight, yet prices can plummet as the public adjusts their perception to incorporate this new information.

Thus, when we’re speculating that a stock price will increase, it isn’t enough to simply imagine how successful the company will be. The more important task is to determine whether the company will outperform the expectations that are baked into the price.

I’m certainly not an expert stock picker and I’m not convinced that such a skillset exists based on the track records of the “experts,” but stocks provide a valuable insight that translates to other areas of life.

Judgements are based on perceptions, not facts.

-Brandon