Every investor would like his list to be better or more promising than the average. Hence the reader will ask whether, if he gets himself a competent adviser or security analyst, he should not be able to count on being supplied with an investment package of really superior merits.
A highly trained analyst ought to be able to use all his skill and techniques to improve substantially on something as obvious as the Dow Jones list. If not, what good are all his statistics, calculations and pontifical judgments?"
Suppose, as a practical test, we had asked a hundred security analysts to choose the "best" five stocks in the Dow Jones Average, to be bought at the end of 1970. Few would have come up with identical choices and many of the lists would have differed completely from each other.
This is not so surprising as it may at first appear. The underlying reason is that the current price of each prominet stock pretty well
- reflects the salient factors in its financial record plus
- the general opinion as to its future prospects.
Hence the view of any analyst that one stock is better buy than the rest must arise to a great extent
- from his personal partialities and expectations, or
- from the placing of his emphasis on one set of factors rather than on another in his work of evaluation.
If all analysts were agreed that one particular stock was better than all the rest, that issue would quickly advance to a price which would offset all of tis previous advantages.
Our statement that the current price reflects both known facts and future expectations was intended to emphasize the double basis for market valuations.
Ref: Intelligent Investor by Benjamin Graham
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