Valuation inefficiencies can occur when investors do not fully understand a company and the dynamics of its business and industry. In-depth research and sector expertise can help savvy investors uncover and profit from mispricing.

Investing in companies whose marketplace valuation indicates that the business has stalled or will significantly deteriorate in the future but that our research indicates will continue to grow their earnings at a relatively rapid rate for a sustained period, is unlikely to lose investors’ money in the long term.

Even in declining PE multiple markets, investments made in such mispriced companies with sustained earnings growth should eventually allow investors to recoup their investment and likely generate significant profits.

Conversely, companies whose marketplace valuations indicate that they will experience rapid and sustained business growth for a prolonged period but where our research indicates that their growth is unsustainable and likely to deteriorate significantly, are unlikely to generate a return for investors even in a rising market.

Investing in equities to generate alpha over the long-term, while also having limited correlation to the benchmark and avoiding the permanent loss of capital, can be better accomplished with a high conviction, Best Ideas stock portfolio rather than one that waters down returns by buying into less compelling companies.