Equity Analysts Have Been Overoptimistic for a Generation

This is explains why you should kill the company and only invest if it has  a margin’s of safety.

Introduction (Via HBR & McKinsey Quarterly)

For the past quarter century, equity analysts’ earnings-growth estimates have been almost 100% too high. Their overoptimistic projections have generally ranged from 10% to 12% annually, compared with actual growth of 6% (excluding the spike in growth from 1998–2001), according to McKinsey research. Only in strong-growth years such as 2003 to 2006 did forecasts hit the mark.

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18. May 2010 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

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