Gary, the entire article will appear in the first issue of the Journal of Psychology and Finance (1st quarter of 2000) whose link I have included at the beginning of the article. I think this is a subscription only journal.
From the Forbes article it does not appear that the authors are trying to quantify such things as sentiment of investors or ability of companies. They simply divided companies into two groups: very expensive companies that consistently outperformed the market over the past 5 years, and cheap companies that consistently underperformed the market over the past 5 years, and then looked at how these same companies did over then next few years. The cheap ones did consistently better on the average.
The article basically says that buying deeply undervalued companies that have greatly underperformed the market over a long period is a better investment strategy than buying highly overvalued companies that have greatly outperformed the market for a long period.
This is not a big revelation. Other market strategies such as "the dogs of the Dow" have proven that this is the case.
It will be interesting to see what will happen with COMS and CISCO over the next 3 months, 6 months, 1yr, 2yrs, 3yrs, 4yrs, and 5 years. As of last Friday, September 24, 1999, COMS was at 27.25 and CSCO at 69. Next checkpoint is end of December <g> |
