Are stocks priced for perfection?
The narrower your investments, the more critical it becomes to right-size them
IN FINANCIAL markets, there is an inherent tug-of-war between themes or stories and valuations. We are seeing one play out in the equity markets right before our eyes, in the semiconductor industry. This reminds me of my formative investment years in the late 1990s. While we should not blindly follow historical examples, this comparison is something for investors to bear in mind when it comes to making financial decisions and sizing investment positions.
Let me start with a caveat. I am not a stock picker. It is incredibly difficult to consistently pick stocks that outperform. This is borne out by the difficulty fund managers have in outperforming their benchmarks over the long term, especially in the more developed, liquid and efficient markets.
Therefore, this column is meant more to provoke thought, rather than to imply an outlook for the stocks mentioned.
